India a Bright Spot: HSBC recommends five stocks amid global volatility

HSBC Global Investment Research has called India a “refuge for investors” in the current global environment marked by economic uncertainty and trade tensions. In its latest strategy note, the global brokerage highlighted the Indian market’s relative strength and steady earnings growth while naming five stocks it believes can outperform. HSBC's picks—Godrej Consumer Products, UPL, GAIL, Ujjivan Small Finance Bank, and HDFC Life—reflect its focus on companies with structural or idiosyncratic growth triggers even as it maintains a neutral stance on Indian equities overall.

HSBC sees selective growth opportunities in India

HSBC said its proprietary data showed Asia and GEM funds are beginning to rebuild positions in India, gradually reducing their underweight exposure. The firm noted that a weaker US dollar and easing inflation conditions could further support foreign portfolio inflows into Indian equities in the coming months.

Despite global headwinds and cautious investor sentiment, HSBC said India remains relatively well-positioned due to domestic resilience. It set a 2025-end Sensex target of 82,240, maintaining a ‘Neutral’ rating from an Asian portfolio perspective.

“We are neutral on India from the Asian perspective,” HSBC said, “but we see it as a relative refuge in the current environment.”

Top stock picks: Godrej Consumer, UPL, GAIL, Ujjivan SFB, and HDFC Life

In a market where valuations appear elevated, HSBC said it prefers companies with company-specific strengths that offer good growth visibility. Among its top five picks:

Godrej Consumer Products Ltd (GCPL): HSBC praised the company’s strong innovation pipeline and market share gains in the home insecticides segment.

UPL: The brokerage expects UPL to surprise positively on growth, margin recovery, and debt reduction—factors that could drive a re-rating.

GAIL: Despite underperformance so far in 2025, HSBC sees structural benefits from the rising demand for clean energy. A possible gas tariff revision and ongoing pipeline projects could act as catalysts.

Ujjivan Small Finance Bank and HDFC Life: Both are set to benefit from an easing interest rate environment. HSBC said policy support from the central government and RBI should aid domestic financial players, with Ujjivan and HDFC Life well positioned to capitalise on improved liquidity.

Earnings outlook: March quarter surprises, but full recovery remains distant

On the earnings front, HSBC noted that March quarter surprised positively. FTSE India (ex-commodities) EPS grew 10 percent year-on-year, up from single-digit growth over the previous four quarters. Industrials, telecom, and healthcare sectors delivered strong performance, while consumer discretionary EPS rose 14 percent due to strength in retail and services.

However, FMCG struggled with soft demand and heightened competition, and the banking and IT sectors posted modest growth of just 5–6 percent YoY.

Despite the positive quarter, HSBC said the path to a full recovery remains uneven. FactSet consensus EPS estimates for 2025 have already been revised downward to 11 percent, and risks remain due to weak urban consumption, sluggish private capex, and policy uncertainty in the US that could affect IT services exports.

“Rate cuts may also hurt banks’ margins,” HSBC warned, noting that banks form a significant weight in the Indian equity indices.

Overall, while HSBC maintains a neutral outlook on Indian equities, it believes India remains a relatively strong investment destination compared to other emerging markets. With supportive policy moves and ongoing foreign inflows, the country offers select opportunities for investors. HSBC’s latest top picks—Godrej Consumer, UPL, GAIL, Ujjivan Small Finance Bank, and HDFC Life—underscore its preference for quality names with differentiated growth potential in a still-cautious environment.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.