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HSBC downgrades Indian equities from overweight to underweight status

Xinhua, May 13, 2015 Adjust font size:

The Hong Kong Shanghai Banking Corporation (HSBC) Global Research has now downgraded India's equities market from "overweight" to "underweight" status, meaning thereby that it expects the returns to be below normal in the short-to-medium term, said local media Wednesday.

"In a report titled "The Flying Dutchman: India - Gravity Sets In", the research arm of HSBC said the new status for India has been revised from "overweight" position notably due to slowing earnings growth and lag-effect of reforms of the government of Prime Minister Narendra Modi, said Indo-Asian News Service.

"Last year, India Prime Minister Modi's victory set the stage for a significant amount of reform optimism and encouraged portfolio inflows," the report quoted Herald van der Linde, head of equity strategy for Asia Pacific for HSBC Global Research, as saying Wednesday here.

"Indian equities rallied and with lack of momentum in other markets, both global and regional mutual funds built historically high overweight positions in this market by the end of 2014. This continues to be the case," he said.

But he said "we now challenge this position and recommend investors to underweight India."

Earnings growth expectations was coming down with no signs yet of recovery in India's capital expenditure cycle and by June, there won't be further rate cuts to support the market, he said, adding poor monsoon showers this year to impact the market.

Another factor behind the HSBC's research arm to cut Indian equities ranking to underweight is the weakening of the rupee, said the HSBC officer.

India's equities market has remained volatile over the past few months. Endi