The tone in the world economy is one of uncertainty, with India emerging as a resilient performer. HSBC has captured this sentiment well in its recent strategy note, where it adopts a cautiously optimistic stance on Indian equities. While short-term risks in earnings and global policy headwinds are acknowledged, the bank has introduced its ‘India Sama Endeavours’—a list of stocks it sees as having strong potential for structural or idiosyncratic growth. This curated list, along with an end-2025 Sensex target of 82,240, reflects both the challenges facing and the potential embedded in India’s equity markets today.

Strong Fundamentals in a Cautious Climate

HSBC’s commentary comes at a time when foreign investors have started to rebuild confidence in Indian markets. Proprietary data suggests that Asia and Global Emerging Market (GEM) funds are gradually moving away from underweight positions on India. While the global investment community remains broadly cautious, a weaker dollar, falling domestic bond yields, and softening inflation provide space for sustained foreign inflows.

However, this upward momentum is not without its hurdles. HSBC notes that while earnings growth exceeded expectations in the March quarter, the outlook remains fragile. Urban consumption is subdued, private capex is yet to witness a meaningful uptick, and IT services face uncertain demand due to shifting U.S. policies. Though rate cuts could support economic growth, they may come at the cost of compressing bank margins—making the financial sector a mixed story in the short term.

The India Five: A Selective, Strategic Play

Against this backdrop, HSBC’s “India Five” picks represent a carefully selected portfolio of companies that could perform well regardless of macroeconomic swings. These include:

• Godrej Consumer Products Ltd (GCPL) – With strong innovation in the home insecticides segment, GCPL is steadily gaining market share. HSBC views its R&D strength and differentiated product offerings as key drivers of long-term value creation.
  
• United Phosphorus Limited (UPL) – Recovering from a difficult phase, UPL is expected to deliver positive surprises in revenue and margins, along with an upward trajectory in debt reduction, according to HSBC.
  
• GAIL – Despite a weak performance this year, GAIL stands to benefit from India’s structural pivot toward clean energy. Tariff revisions and the completion of new pipelines could act as near-term catalysts.
  
• Ujjivan Small Finance Bank – Positioned well in an easing interest rate environment, the bank’s focus on underserved segments and a robust balance sheet provide a strong platform for scaling operations.
  
• HDFC Life – As interest rates decline, insurers like HDFC Life may enjoy better valuations. HSBC sees additional support coming from favourable policy moves and rising awareness of financial protection products.
  

Policy Support and Domestic Tailwinds

India’s policy environment has remained broadly supportive. Government capital expenditure surged to record levels in Q1 FY25, and the Reserve Bank of India (RBI) has taken a surprisingly accommodative stance. A 50-basis point cut in the policy rate and a 100-basis point cut in the Cash Reserve Ratio (CRR) signal this policy pivot. Combined with consistent inflows from domestic investors, these measures are helping to cushion Indian equities amid persistent global uncertainty.

At the same time, HSBC notes that India’s structural advantages—robust services exports, a large domestic consumer base, and growing prominence in global supply chains—continue to attract investor interest. These dynamics strengthen the long-term growth narrative, particularly in high-potential sectors like renewable energy and advanced manufacturing.

Earnings Recovery Still in Progress

Despite some promising indicators, HSBC tempers expectations by noting that a full earnings recovery remains a few quarters away. While Industrials, Telecom, and Healthcare sectors posted strong growth in the March quarter, FMCG companies faced headwinds from soft demand and stiff competition. Banking and IT reported muted 5–6% year-on-year growth, indicating deeper structural shifts within these sectors.

Nonetheless, a 10% YoY earnings-per-share (EPS) growth for the FTSE India index (excluding commodities) in Q4 points to a gradually improving base. As private investment revives and rural demand stabilises, earnings momentum could gather pace in the second half of FY26.

Conclusion

HSBC sees both challenges and opportunities in India’s equity markets. While sectors such as banking and IT may continue to experience slow growth, strong government support, a falling interest rate environment, and consistent foreign inflows provide a solid foundation. The HSBC India Five picks reflect the bank’s confidence in companies with strong fundamentals and long-term potential.

For investors, the message is clear: remain patient, focus on fundamentally strong and scalable businesses, and stay invested for the long haul. As India navigates a turbulent global economy, its resilience and reform-driven momentum may well offer attractive rewards for those who stay the course.