HSBC upgrades Indian shares to overweight, downgrades China to neutral

According to a Business Standard report, HSBC has upgraded Indian equities to 'overweight' following the recent market correction, while downgrading China to 'neutral'. Strong earnings and fair valuations are the main reasons behind this shift, while weak investor sentiment and limited re-rating triggers have been noted in China.

On the other hand, according to another Business Standard report, a recovery opportunity may emerge for equities after two years of underperformance due to India's strong economic fundamentals and normalizing valuations, as the country's economy is showing resilience.

According to an Economic Times report, during the first 10 months of the year 2026, the Nifty 50 declined in 106 sessions out of 204 trading sessions, resulting in a loss of over 11.8%. However, earnings have improved consistently. The annual earnings growth of Nifty 50 companies was 4% in the March 2026 quarter, which increased to 18% in the June 2026 quarter. According to Motilal Oswal Financial Services' interim report for the September 2026 quarter, this recovery is becoming broad-based across sectors despite commodity price pressures and global uncertainties.

The role of the bond market has been significant behind this imbalance in the market. Higher bond yields make investment in risk-free government debt attractive. In India, due to higher crude prices, inflationary pressure, and hikes in the repo rate by the Reserve Bank of India (RBI), the 10-year G-sec yield has risen from 6.5% to 7.4%.