Indian Market Outlook: HSBC Mutual Fund (MF) stays bullish on India amid growth revival and fair valuations

HSBC Mutual Fund (MF) remains optimistic about Indian equities, citing favourable valuations and a revival in growth momentum. In May 2025, the Bombay Stock Exchange (BSE) Sensex and National Stock Exchange (NSE) Nifty rose 1.7% and 1.9%, respectively, while broader indices outperformed, NSE Midcap jumped 6% and BSE Smallcap surged 10.6%. Capital Goods led sectoral gains, followed by Realty, Metals, Information Technology, and Auto. Power and Oil & Gas aligned with Nifty's performance, whereas Fast-moving consumer goods (FMCG) ended in the red. Despite a 1% downward revision in Nifty’s earnings per share estimate for the CY26, HSBC MF said the forward price-to-earnings ratio of 20.4x is in line with its five-year average and carries a 10% premium to the 10-year average.
Looking ahead, HSBC MF believes India’s growth cycle is bottoming out, supported by a fall in crude oil prices, a stable liquidity environment, and prospects of a normal monsoon. While global uncertainties may affect private capex in the near term, the fund anticipates an uptrend in investment activity backed by public infrastructure spending, renewed real estate demand, and private sector participation. Emerging areas such as renewable energy, localisation of high-tech manufacturing, and India’s growing integration into global supply chains are also expected to contribute. Additionally, easing monetary policy, a weakening dollar, and reduced oil prices have set the stage for further rate cuts, with economists projecting a 50 basis point reduction. Despite external headwinds, HSBC MF remains constructive on Indian equities, citing robust domestic fundamentals and policy tailwinds likely to sustain market momentum in the medium term.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.