HSBC and Citigroup have turned bullish on Indian stocks as the market's sharpest rally in over four years draws record foreign inflows. HSBC lifted local equities to overweight from neutral, citing resilient earnings and reasonable valuations. Citigroup raised its 12-month target for the NSE Nifty 50 Index by nearly 8% to 28,000, pointing to improving profit growth and lower oil prices.
The calls suggest Indian equities' recent rebound may have further to run, signaling a broader reset in sentiment after a prolonged stretch of underperformance. India offers diversification and low volatility in Asian markets dominated by AI stocks, according to HSBC strategists. They favor banks, industrials, consumer discretionary companies, insurers and hospitals.
The benchmark index is up nearly 8% this month, the most since July 2022, making India one of the best-performing major markets globally. Overseas funds bought a net $3.6 billion of local shares in the four days through Thursday, putting them on course for their biggest-ever weekly inflow. Provisional data showed another $1.5 billion of purchases Friday.
The shift marks a sharp reversal after foreign investors spent much of the past two years cutting exposure to India as they chased AI-driven gains elsewhere in Asia and the US. Citi sees significant scope for foreign positioning to rebuild, with a percentage-point increase in active fund allocations potentially generating $12 billion in inflows. The brokerage expects Nifty earnings to grow 15%-16% annually for fiscal years 2026-2028, with cheaper crude supporting the economy and corporate profits.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing