India Market Outlook: Long-Term Tailwinds Intact, But Wait For Earnings Clarity, Says HSBC

India’s equity market, while currently navigating through mixed global signals and earnings-related uncertainty, continues to offer compelling long-term potential. According to Harald Van Der Linde, head of equity strategy, Asia Pacific at HSBC, investors are likely to gradually return to Indian equities, driven by structural strengths and global diversification needs.

India’s relatively low exposure to global tariff tensions places it in a favourable position compared to other Asian markets. With geopolitical friction, particularly between the US and China, creating turbulence, India stands out as a large, domestically driven economy that is less vulnerable to trade headwinds.

Van Der Linde believes global investors looking to diversify away from developed markets and China are increasingly eyeing India. “As the dollar weakens and flows return to emerging markets, India stands to benefit,” he told NDTV Profit. Its liquidity, market depth, and demographic momentum are long-term tailwinds.

However, HSBC remains neutral on India in the near term, citing the need for better visibility on corporate earnings. Forecasts for FY26 earnings growth have softened, with expectations dipping below 10% in some quarters. “Earnings momentum is crucial. Without that, even reasonable valuations may not be enough to trigger aggressive foreign inflows,” Van Der Linde noted.

If earnings delivery remains weak or erratic, it could limit re-rating potential. But a surprise on the upside could swiftly shift investor positioning, especially from underweight levels.

Retail and domestic institutional investors continue to provide a stabilising force. Systematic investment plans and growing direct participation mean that Indian equities are less reliant on foreign capital than in previous cycles.

Looking ahead, key drivers will include: clearer earnings guidance, the trajectory of global interest rates, oil prices, and capital flows into China. A resurgence in Chinese growth could divert flows, but Van Der Linde argues that India and China offer complementary exposures and both belong in global portfolios.

Private banks are among HSBC’s top preferences in Indian markets. “They’re large, liquid, and trading at more attractive valuations than the broader market,” said Van Der Linde. He highlighted that many of these lenders are still gaining share from public sector counterparts and are poised for sustained earnings growth. Improved asset quality, stronger digital capabilities, and rising credit penetration make Indian private banks a strong structural story.

Van Der Linde also pointed to rural consumption as a key theme. “The shift from urban to rural demand is something investors should monitor closely,” he said.