India’s macro outlook remains firm but can it translate to equity markets growth as well? HSBC forecasts 2025 GDP at 7.2% and 2026 growth is pegged at 6.3%. However, HSBC noted that this strength may not immediately support equity performance because near-term earnings momentum appears soft in its six-month tactical view.
In the Think Future 2026 report, HSBC stated that slower earnings revisions and valuation premiums need to be monitpred even as it maintains a constructive long-term view on India.
HSBC’s tactical stance on India
The regional outlook section of the report stated: “For Indian equities, we remain cautious about the subdued earnings growth, even as the impact of government measures becomes clear, but maintain our bullish longer-term view.” HSBC treated this comment as a six-month stance, not a structural downgrade.
HDBC observed that India’s valuations, while supported by steady domestic demand and long-term fundamentals, could come under pressure if earnings do not strengthen in line with expectations. It stated that earnings revisions have slowed compared to parts of North Asia, which places more weight on whether companies deliver numbers on time. In other words, India’s story remains strong, but the next phase of market performance depends on how quickly earnings catch up.
India’s GDP is forecast at 7.2% for 2025 and 6.3% for 2026. Inflation is projected at 2.6% for 2025 and 4.8% for 2026 on a fiscal-year basis. These figures keep India among the faster-growing economies in HSBC’s global dataset. The report did not link the cautious equity view to any weakness in these macro indicators. Instead, it pointed to the gap between healthy growth forecasts and the softer near-term earnings cycle, which the bank believes will matter more for equity returns in the months ahead.
HSBC’s allocation changes: Increasing Asia exposure and reducing US
HSBC stated that it has slightly reduced its exposure to US equities and added more weight to Asia. The bank’s preferred markets are mainland China, Hong Kong, South Korea, Japan and Singapore. It explained that these markets offer a better combination of reasonable valuations and clearer near-term earnings prospects, which fits the six-month tactical stance laid out in the report.
The report also pointed to Asia’s stronger technology foundation. It projects that data-centre capacity in Asia Pacific will rise sharply through 2030, with China contributing most of the expansion. This projected increase gives the region a more direct link to the capital spending tied to AI, and HSBC stated that this connection supports its decision to favour these markets when adjusting its equity allocations.
This shift places India in a different category. HSBC maintained its long-term positive view on India but kept a cautious near-term stance because earnings growth has been softer and valuations remain elevated. As a result, while India continues to hold structural appeal, the bank’s tactical additions have gone to other Asian markets where it sees faster earnings support and more attractive pricing in the months ahead.
HSBC on alternative investment, gold: Broadening the diversification base
A large section of the report examined how investors can reduce concentration risk. HSBC stated that there is “no silver bullet” in markets where traditional assets have moved more closely together. It advised using alternatives such as hedge funds, private equity, private credit and infrastructure to add low-correlation buffers. The bank also noted that new structures are making certain alternatives more accessible to sophisticated retail investors.
Gold forms a key part of this approach. HSBC cited the strong gains made by metal in 2025, supported by central bank demand and ETF flows. It presented the movement of gold alongside shifts in bond yields, changes in the USD and the rise in central bank reserves, showing that gold strengthened when yields softened, gained further as the USD eased and received additional support from steady official-sector buying through 2025. The bank expects this trend to continue gradually, with short periods of consolidation.
HSBC on fixed income options
HSBC stated that global investment-grade bonds remain its preferred choice because they offer steadier income with less credit risk. The bank explained that investment-grade issuers are in a stronger financial position and therefore provide a more reliable return, which becomes important when markets face uneven earnings cycles.
It also favoured emerging market local currency government bonds. According to the report, these bonds tend to move differently from global risk assets, which adds useful diversification. HSBC added that some emerging market central banks have more room to cut rates, which could support local currency bond prices over the coming year.
High-yield bonds were less attractive. The bank pointed out that spreads have narrowed, meaning investors are being paid less for taking on more risk, and the current environment does not justify stretching for yield.
The report advised keeping USD bond duration on the shorter side, roughly in the 5-7 year range. HSBC stated that this helps reduce exposure to the sharper price swings seen in long-tenor bonds, especially when interest rate expectations remain fluid.
HSBC: Risks and factors to watch in 2026
HSBC listed several risks that could influence markets in the months ahead. These included the direction of US Federal Reserve policy, delays in data-centre development caused by supply or labour issues and geopolitical tensions that can affect global flows.
For India, the bank pointed to earnings revisions through the first half of 2026 as a key indicator. Margin trends in banks, autos and industrials, together with policy decisions that affect consumption or capital expenditure, will help show whether earnings are beginning to stabilise.