Should FPIs Return To India? HSBC Says Time's Right — Here's Why; Check Top Stock Bets

As the Indian market gears up for another earnings season, HSBC believes the time is right for foreign investors to return after an extended period of weakness and macro turmoil that has stifled growth.

In its latest India Strategy report, HSBC analyst Prerna Garg pointed out that a combination of low valuation, a slow recovery in earnings and a low foreign fund positioning makes it an ideal staging ground for foreign investors to return to India.

Foreign investors, over the last 12 months, have avoided the Indian markets as they went through a strong correction. Despite the recent surge, the Nifty50 benchmark is still down over 5% in the past year.

So far in September, they have offloaded equities worth Rs 13,450 crore. The FPIs' net selling in August stood at Rs 34,993 crore, and in July, it was Rs 17,741 crore. However, they were net buyers of equities worth Rs 14,590 crore in June. In 2025 so far, the FPIs have net sold equities worth Rs 1.42 lakh crore.

But HSBC believes the time is right for these investors to return. This is in line with an earlier note on HSBC, which suggested that valuations are no longer a concern for Indian markets after strong corrections and that Sensex could soon reach 94,000.

In the report, HSBC's Prerna Garg adds that recent demand-side measures – including the GST cuts – are positive for the consumer sector.

Auto sales are also set to benefit from the GST cuts, which have led to a significant lowering of car prices across segments. Both the auto and consumer staples sectors may witness high margin recovery on account of these measures.

In financials, HSBC prefers large banks, diversified financials and multi-line non-life insurers over other institutions. This comes at a time when the industry has struggled with elevated credit costs and worsening asset quality.

The outlook for the technology sector has also improved after a material re-rating, HSBC notes. The firm expects demand to pick up next year.

While US tariffs remain an overhang for the pharma sector, HSBC believes the risk is low given the country's reliance on Indian generics.

Telecom and hospital sectors, meanwhile, are structural demand plays, according to HSBC.

With Indian markets expected to stage a comeback, HSBC has placed bets on some of the largest companies in the world.

This includes Marico and Trent from the consumption theme and M&M from the auto pack. In industrials, infrastructure and real estate, HSBC has placed its bet on Adani Ports and Special Economic Zone, Phoenix Mills, and UltraTech Cement.

HSBC has picked NTPC as its top power bet and Infosys as its top bet in the IT space. Divi's Labs is HSBC's main in the broader pharma pack.

And finally, in BFSI, HSBC has singled out HDFC Bank and ICICI Lombard.

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