'AI Boom Missing In India’: HSBC Warns Of Key Risk, Targets Sensex At 94,000
Foreign institutional investors, who would like to keep their distance from the artificial intelligence led rally, will position in India, according to HSBC.
HSBC Global Research has warned that India’s limited exposure to the artificial intelligence boom could be a key risk for its equity markets, even as it expects the BSE Sensex to reach 94,000 by 2026.
“Many foreign institutional investors, who would like to keep their distance from the artificial intelligence-led rally, will position in India and open up paths for foreign fund inflows, which were drying up,” HSBC Global Research said in its latest report.
The brokerage, which upgraded India to ‘Overweight’ six weeks ago, said valuations remain high but manageable. It described India’s high valuation as “a headwind rather than a problem” after the recent correction in equities. Indian stocks have underperformed Asian peers by about 30% over the past year, but HSBC said “the worst is over” and Indian equities now offer value relative to China.
India is now “the biggest underweight in global equity management portfolios,” according to the report. Only about a quarter of the funds tracked by HSBC hold overweight positions. “As India is acting as a hedge against the AI rally, it will emerge as an outsized beneficiary of any additional money coming into emerging markets,” the brokerage said.
HSBC expects a broad-based recovery in corporate earnings by 2026, led by banks, technology, and consumption-focused sectors. “Banks were the biggest laggard on earnings in 2025, but margins will likely improve as deposits have rolled over,” it said. It added that the technology sector should benefit from stronger demand and that the auto industry could see gains following the goods and services tax rate cut.
The firm flagged delays in earnings recovery, a diversion of global funds to AI-linked markets, and weaker domestic investor demand as downside risks.
HSBC said India’s long-term profit drivers remain intact, citing infrastructure expansion, formalisation of retail, and the country’s growing role in global supply chains. “These are low GDP and capital, better infrastructure opening new markets to corporates, a rise for formal retail over informal, and India becoming a node in the global supply chain,” the report said.
