Indian equities displayed a recovery in April, defying geopolitical tensions and high crude oil prices, signaling a positive long-term outlook, according to a report by HSBC Mutual Fund. The report highlights expectations of a robust investment cycle in India, driven by infrastructure spending and a revival in private capital expenditure. Additionally, potential trade agreements with the EU and the US are anticipated to bolster manufacturing growth and enhance export competitiveness.
Nifty valuations are currently hovering around their 10-year average levels, with short-term risks stemming from geopolitical uncertainties, elevated crude prices, a depreciating rupee, and below-average monsoon forecasts. Despite global economic challenges, the report predicts India’s growth to remain resilient, with the investment cycle poised for a medium-term upswing supported by government investments in infrastructure and manufacturing initiatives.
The Reserve Bank of India is projected to maintain a prolonged pause on policy rates while ensuring supportive liquidity measures. In the debt markets, HSBC Mutual Fund maintains a neutral to underweight stance on duration positioning due to market uncertainties arising from high oil prices and geopolitical developments, which pose risks to both inflation and growth. The report identifies certain segments, such as 2-3 year corporate bonds and certificates of deposit, as attractive, while longer-term government securities could benefit from a potential yield curve flattening.
During the first quarter of FY27, equity indices in India started on a positive trajectory following a significant correction in March. The Sensex surged by 6.9%, Nifty by 7.5%, NSE Midcap index by 13.2%, and BSE Smallcap by 19.6% in April. Notably, sectors like power, real estate, and capital goods witnessed a substantial rebound and emerged as top performers. Additionally, metals, FMCG, banks, autos, and oil & gas sectors outperformed the Nifty index.
Healthcare sector slightly lagged behind the Nifty performance, while the IT sector, although the worst-performing, managed to end on a slightly positive note.
