HSBC's Pranjul Bhandari Says Undervalued Indian Equities Need These Triggers For Rebound
India has underperformed over the last year in all key asset classes — equities, government and corporate bonds, and currency, Pranjul Bhandari said.
Broad-scale economic reforms and deregulation are the two macro factors that can help India's undervalued equities gain positive momentum in the short term, even as US tariff headwinds remain, according to HSBC Chief India Economist Pranjul Bhandari.
"We need a series of economic reform, GST is just one of them. Deregulation happening at the central and state level can be silent, but have huge impact. We are now more open to external trade," Bhandari said.
She said India's recent trade arrangements with countries in the Middle East and Europe shows the country's increasing openness to external trade. A reduction in import tariffs will help domestic producers in their input costs and make goods more competitive.
Moreover, the economist said India had long only attracted high-tech FDI in areas like solar panels, green hydrogen, and electric vehicles; however, now, most developing and advanced countries are rolling out competing incentives.
"So now, all that money may not come into India. We can attract many mid-tech manufacturing FDI like textiles, furniture, and toys. These are labour intensive sectors that can provide more jobs," Bhandari said.
She said India has underperformed over the last year in all four asset classes — equities, government and corporate bonds, and currency.
"FDI flows across the world are on pause because there is uncertainty about the rules of the game... Strengthening the economy through reforms and stimulus could be a key catalyst for markets. Growth outlook will be clearer from mid-2026," she said.
GST Impact
Bhandari said the effects of GST rate cuts on a range of consumer goods will be determined based on household behaviour.
She explained that of the estimated Rs 2.5 lakh crore tax revenue foregone by the government, Rs 1.5 lakh crore comes from GST cuts.
"If people spend this money to take advantage of GST cuts, that can add four percentage points to GDP growth. However, they can also try to save some portion due to uncertainty about wages and salaries. That may mean only two percentage points to GDP," Bhandari said.
The HSBC economist further put the scenario this way: US tariffs will chip away from growth while GST rate cuts will add to it in the festive months of September and October. "Whether that sustains in November-December and beyond remains to be seen."
