Mumbai, Nov. 9 -- Foreign brokerage HSBC on Monday upgraded Indian equities to "overweight" after the recent market corrections. The brokerage also downgraded Chinese stocks to "neutral", as per a report.
"Following a multi-year valuation re-set and significant underperformance to EM (emerging markets), we now raise Indian equities to overweight," the brokerage said.
It expects strong credit growth, resilient earnings, and measures supporting growth and the currency going forward.
Even as oil prices, which are bound to impact an energy-importing country like India, continue to remain volatile, it will not be significant enough to affect overall sentiment, the report said. High oil prices and El Nino remain a risk and are unlikely to materially weaken overall sentiment, it said. "India offers diversification and low volatility in Asian markets dominated by AI stocks," it added.
Indian valuations look "more reasonable" now, and growth remains resilient despite a series of macro shocks, including higher interest rates and oil, it said.
From a sectoral standpoint, the brokerage said it prefers capital goods, cement, ports and electronic manufacturing services, while on the consumption front, it prefers consumer discretionary over staples with a preference for retailers and autos.
Interestingly, the brokerage said it is positive on insurance and hospitals despite the recent regulatory uncertainty.
On the Chinese downgrade to neutral, it said the action is driven by a belief that there are limited catalysts that can drive a sustained re-rating.
"Weak consumer confidence, property market pressures, and softer domestic investment continue to weigh on growth, while subdued southbound flows and declining margin financing point to weaker investor appetite," it added.
Published by HT Digital Content Services with permission from Millennium Post.