HSBC Remains Bullish on India, Predicts Sensex to Hit 94,000 by 2026
HSBC Global Research has reaffirmed its optimistic outlook on Indian equities, projecting the Sensex to reach 94,000 by the end of 2026. This target represents a substantial upside of approximately 10% from current levels. The brokerage's positive stance is underpinned by expectations of lower inflation, ongoing tax reforms, and a more accommodative monetary policy in India.
The brokerage expects a broad-based earnings recovery for Indian companies in 2026, projecting a 15% growth in Earnings Per Share (EPS). HSBC believes that the worst of the earnings downgrades is behind us, and recent corporate results have boosted confidence in the growth outlook. Valuations are also considered more reasonable, with India's premium over other emerging markets returning to normal levels.
HSBC anticipates increased foreign fund inflows into India as investors seek to diversify beyond artificial intelligence (AI)-focused sectors in Asia. The brokerage views India as a key diversification play away from crowded AI trades. Despite concerns about valuations, HSBC continues to see India as a standout opportunity within emerging markets.
While domestic conditions may present challenges, including potential impacts on GDP growth from US tariffs on Indian exports and trade sentiment favoring China, the upgrade signals a positive outlook for Indian markets. A trade deal with the US would be a welcome development but is not essential for the return of foreign investors, according to HSBC.
Key Sectors and Stock Picks
HSBC is particularly keen on sectors driven by domestic demand and strong growth prospects. The brokerage is "overweight" on sectors such as banks and financial services, consumer discretionary (including automobiles), telecommunications, and energy. Financials stand out for their steady growth and potential to attract foreign investors. Consumer discretionary companies, including automobile manufacturers, are expected to benefit from lower interest rates. Telecom companies are anticipated to enjoy strong pricing power and limited competition. The brokerage also favors companies in the energy sector, considering them well-placed given softer oil prices.
While HSBC has not explicitly named its top 10 favorite stocks for 2026 in all the available reports, several companies have been highlighted as promising picks:
- Financials: State Bank of India (SBI) and HDFC Bank
- Information Technology: Infosys
- Consumer Discretionary: Mahindra & Mahindra (M&M), Trent, Phoenix Mills
- Fast-Moving Consumer Goods (FMCG): Marico, Godrej Consumer Products
- Basic Materials: Hindalco
- Infrastructure: Adani Ports & SEZ
HSBC favors large-cap stocks and identifies selective opportunities among mid-cap stocks.
Potential Risks
HSBC has identified several risks to its forecasts, including a slower growth recovery, enthusiasm around the artificial intelligence theme elsewhere in Asia, rising geopolitical tensions, and currency swings. External shocks, particularly related to geopolitics and global rate expectations, could also create interim volatility.
Current Market Performance
On December 15, 2025, the Sensex fell to 85213 points, representing a 0.06% decrease from the previous session. Over the past month, the index has increased by 0.31% and is up 4.24% compared to the same time last year.
