By Samannay Biswas

Copyright timesnownews

India’s stock market, which ranked as the world’s worst-performing major equity market in 2025, could soon witness a sharp turnaround. In a new report, global brokerage firm HSBC has upgraded India to an “overweight” rating, signaling confidence that the Sensex could climb to 94,000 by the end of 2026 , a potential 13% upside from current levels. The optimism follows months of market underperformance, weak corporate earnings, and subdued consumer demand. But HSBC says a confluence of factors now make Dalal Street look attractive relative to other Asian peers. 1. Valuations Now Look Attractive For much of 2025, Indian equities traded at elevated price-to-earnings (P/E) ratios, making them less appealing compared to emerging-market peers like China. However, valuations have since moderated significantly. HSBC notes that while India still trades at a premium, the gap has narrowed. “A fall in multiples to average EM levels is unlikely, given strong domestic demand. On a relative basis, India is starting to offer value,” the bank said. Consensus earnings growth forecasts for 2025 have already been revised down from 12% to 8–9%, while 2026 projections of 15% remain achievable, especially with a low base effect and fresh policy tailwinds. 2. Macro Backdrop Turns Supportive HSBC highlights that domestic macroeconomic conditions have improved sharply. Inflation, which hovered above 6% in late 2024, has now plunged to an eight-year low of 1.6%. This shift has enabled the Reserve Bank of India (RBI) to cut interest rates and ease credit conditions, encouraging lending and investment. On the fiscal side, the government has rolled out income tax cuts, GST reforms, and consumption-boosting measures, creating a more favorable environment for corporate earnings recovery. 3. Foreign Investor Positioning Light One of the most striking market dynamics in 2025 has been the sharp withdrawal of foreign institutional investors (FIIs). HSBC estimates that FIIs have pulled out $15 billion from Indian equities since January. While this exodus weighed on markets earlier, HSBC argues it has now created room for renewed inflows. With global investors significantly underweight on India, any shift in sentiment could trigger strong re-entry buying, amplifying upside momentum. 4. Minimal Impact From Trump’s Tariffs Despite U.S. President Donald Trump’s move to impose a 50% tariff on Indian goods, HSBC believes the actual impact on listed companies will be negligible. That’s because only 4% of BSE500 companies’ revenues come from exports to the U.S. Moreover, pharmaceuticals , India’s most U.S.-dependent sector , have been excluded from the tariff list. While tariffs remain a psychological overhang, HSBC says they are unlikely to derail India’s long-term growth or equity performance. Why It Matters for Investors HSBC’s bullish outlook comes after a bruising year for Indian equities, but the brokerage sees 2026 as a year of recovery and opportunity. If its forecast holds true, the Sensex could touch 94,000, supported by: More realistic valuationsA stronger macroeconomic environmentPotential foreign capital inflowsLimited tariff exposure For global investors seeking exposure to emerging markets, India is now looking undervalued relative to peers. For domestic investors, the note offers a boost of confidence ahead of the festive season. Get Latest News live on Times Now along with Breaking News and Top Headlines from Business, Companies and around the world.