New Delhi, Dec 10, 2025
Though Indian equities underperformed in 2025, a stronger performance is awaiting them in 2026, driven by supportive government policies and rate cuts, a report said on Wednesday.
A double‑digit return is likely next year if policy measures revive consumption along with a favourable regulatory regime, the report from HSBC Global Investment Research said.
“Equities underperformed in 2025, but thanks to government support we expect next year to be better, especially compared to regional peers,” the report said.
The underperformance was due to companies’ missing earnings estimates and India’s relative weak positioning in the AI value chain.
“While challenges remain, we believe some of this underperformance will unwind in 2026. Significant initiatives by the government to revive consumption such as tax cuts, rate cuts, trading restrictions, etc,” the report said.
“At the sector level, we expect a recovery in IT demand, domestic consumer demand and credit off-take in 2026. Cement consolidation may push up prices, while the oil and gas sector may benefit from more gas supply and lower crude prices,” said Yogesh Aggarwal Head of Research, India said.
HSBC’s analyst said that property is favoured as households upgrade to larger homes while insurance and hospitals remain attractive.
Growth drivers and outlooks vary across these levels and investors need to re-calibrate their valuation expectations accordingly, the report said.
Favourable demographics remain the long-term attraction of India coupled with investment in building manufacturing capabilities, especially for semiconductors and electronics, and improving rural incomes.
The firm highlighted the need to accelerate low-tech manufacturing to create much needed jobs for the youth population.
The rate of urbanisation remains slow in India compared to China or Indonesia and a high-dependency ratio isn’t much help in the near term, the report noted.
On the macro front Reserve Bank of India upgraded India’s GDP growth to 6.8 per cent and inflation eased to its lowest level in a decade, enabling monetary easing and supporting credit growth and consumption.(Agency)
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