Indian Equity Market Outlook Improves as Crude Oil Prices Drop; Sensex Could Reach 84,000, Report Says

Mumbai, July 16: The outlook for the Indian equity market has improved, with the Sensex projected to touch the 84,000 mark by the end of this year. This positive shift is attributed to the decline in crude oil prices in international markets, strong domestic consumption, and reduced earnings-related risks for companies, according to a recent report.

According to HSBC’s brokerage report, the macroeconomic environment for Indian equities has significantly improved in recent weeks, as crude oil prices have rebounded more quickly than expected from previous struggles.

The report indicates that the drop in oil prices has alleviated pressure on corporate margins and reduced the likelihood of significant cuts in earnings forecasts.

Valuations have now normalized, while lower energy prices and robust consumption have enhanced the earnings outlook.

However, it is noted that following recent heavy buying, consumption may slow in the upcoming months, with El Niño posing a significant risk to rural demand.

The report also states that the expected earnings growth for FY27 (excluding commodities) has been revised down from 18% to 15%. Further cuts may be anticipated.

HSBC analysts noted that recent measures by the RBI to attract foreign investment into bonds and bank deposits have helped stabilize the rupee and reduce capital outflows.

Foreign institutional investors have also turned net buyers, with approximately $1.8 billion invested so far in July.

Despite upgrading Indian equities from ‘underweight’ to ‘neutral,’ the brokerage cautioned that foreign investment may not be sustained long-term, as global investors might refocus on AI-related opportunities in other markets.

Nevertheless, they expect domestic investor demand for equities to remain strong.

Additionally, the brokerage prioritized India’s private banks, consumer discretionary, real estate, commodities, and select industrial companies in its report. However, they remain cautious about the software services sector due to AI-related concerns, despite significant improvements in valuations within this sector.