HSBC shares five stocks to buy, calls India a ‘refuge for investors’

Global brokerage firm HSBC wrote in its note that the Indian markets are well placed amid global uncertainty and trade tensions. According to its proprietary positioning data, Asia and GEM (Global Emerging Markets) funds have begun rebuilding their positions in India by reducing underweights. However, global investors remain cautious.

HSBC said that a weaker dollar and easing inflation indicate that foreign inflows into Indian equities could continue in the coming months.

Q1 earnings fared better

On earnings, the brokerage said that a sustained recovery will take time. While Q1 results surprised on the upside, with FTSE India (ex-commodities) earnings per share (EPS) rising 10% year-on-year, up from single-digit growth over the past four quarters.
Industrials, healthcare and telecom reported strong growth. Consumer discretionary saw a 14% EPS growth on the back of strong numbers in retail and services. However, FMCG companies had another weak quarter because of soft demand and increased competition. Growth in banking and IT remained tepid at 5-6% YoY.

Despite the Q1 beat, HSBC believes a sustained earnings recovery is still a few quarters away.

Market sentiment has improved

The foreign brokerage wrote in its note that Indian equities have rebounded notably in the past few weeks on the back of lower domestic bond yields, now at a three-year low. Lower local bond yields are generally supportive to equities, HSBC said.
However, it remains cautious on India’s growth outlook and believes current valuations are elevated.

In this environment, HSBC prefers stocks that offer good growth, particularly due to structural or idiosyncratic reasons. These are its top five stock ideas in India:

– Godrej Consumer Products (GCPL) stands out for its innovation capabilities and is gaining market share in the home insecticides business.

– United Phosphorus Limited (UPL) is on course for recovery, with potential positive surprises in growth, margins, and debt reduction, which could trigger further re-rating.

– GAIL has underperformed this year but it is structurally well-placed to benefit from a rise in demand for clean energy in the medium term. A potential gas tariff revision and more pipeline completions could be near-term catalysts.

– Ujjivan Small Finance Bank and HDFC Life are seen as beneficiaries of the easing interest rate environment.

HSBC has also maintained a ‘Neutral’ stance on India from an Asian portfolio perspective, with the 2025-end index target of 82,240 for the Sensex.