HSBC Global Research has cut its 2025 year-end target for the Sensex to 90,520, from 1,00,080 points, citing risks from earnings downgrades and high valuations. “We see a 15% upside in India, but earnings per share (EPS) downgrades point to growth shifting down a gear to a still strong but more sustainable level,” Herald van der Linde, head of equity strategy, Asia Pacific at HSBC said in a report on Tuesday.
The revised target still represents an over 15% upside from current levels. The Sensex closed at 77,578.38 points on Tuesday.
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After a soft Q2 earnings, the third quarter has gotten off to a weak start with consensus cutting full-year estimates for over 60% of the companies. India is possibly settling on a slower growth trajectory than the past few years, HSBC said. “As earnings stall, investors will likely re-evaluate their positions. This poses a near-term risk to India equities,” the report said.
Another concern is the large-cap pool — usually tapped by foreign investors — growing at a slower pace, with the EPS growth being heavily skewed towards small and mid-cap stocks. Mid and small-caps are expected to grow much faster at 30%, while the large cap universe is expected to grow by only 12%.
Citigroup has also downgraded India stocks to ‘neutral’ from ‘overweight’, citing stalling earnings growth and pressure from foreign outflows following China’s recent policy support measures, and said Beijing could see an upside surprise if it delivers on its policy stimulus.
Citi has forecasted the Nifty to touch levels of 25,000 by September 2025 — about 6% rise from hereon while CLSA is projecting a 13% upside potential (for MSCI India) over the next 12 months, based on its economic projections.
Despite the slowdown, India is poised to stay as one of the fastest-growing economies in 2025, said the HSBC report. Urban consumption, traditionally a key driver of growth, has softened, with segments such as autos and other discretionary goods showing signs of slowdown. High-frequency indicators, including GST collections, PMI data, and auto sales, have also fallen short of expectations, it said.
While urban demand is showing signs of fatigue, rural consumption is expected to pick up in the coming months,
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