Indian equities outlook constructive long-term: HSBC MF report
Synopsis
India's equity markets staged a powerful April comeback — Smallcaps up nearly 20%, Midcaps up 13% — even as geopolitical headwinds and crude prices stayed elevated. HSBC Mutual Fund's latest report argues this is not a dead-cat bounce but the beginning of a structurally constructive phase, underpinned by infrastructure spending, private capex recovery, and potential EU and US trade deals.
Key Takeaways
Sensex rose 6.9 per cent and Nifty gained 7.5 per cent in April 2025 , recovering from March's sharp correction.
BSE Smallcap surged 19.6 per cent and NSE Midcap gained 13.2 per cent in the same period.
HSBC Mutual Fund describes the long-term outlook for Indian equities as constructive, supported by infrastructure spending and private capex recovery.
Nifty valuations are trading near their 10-year average , with near-term risks from crude prices, geopolitical tensions, a weaker rupee, and below-normal monsoon forecasts.
The RBI is expected to maintain a prolonged pause on policy rates while keeping liquidity supportive.
Potential trade deals with the EU and the US are seen as likely drivers of manufacturing growth and export competitiveness.
Indian equities staged a broad recovery in April 2025, bouncing back from March's sharp correction despite persistent geopolitical tensions and elevated crude oil prices, according to a market outlook report released on Thursday, 14 May by HSBC Mutual Fund. The fund house described the long-term trajectory for domestic markets as constructive, anchored by a strengthening investment cycle and improving export prospects.
April Market Performance
Equity indices opened Q1 FY27 on a positive note, with the Sensex rising 6.9 per cent and the Nifty adding 7.5 per cent through April. The rally was even more pronounced in broader markets: the NSE Midcap index gained 13.2 per cent and the BSE Smallcap surged 19.6 per cent, signalling renewed risk appetite across market capitalisations.
Power, realty, and capital goods led sectoral gains, bouncing back sharply after the prior month's sell-off. Metals, FMCG, banks, autos, and oil and gas also outperformed the Nifty benchmark. Healthcare slightly underperformed, while IT was the weakest sector — though it still ended the month in positive territory.
Investment Cycle and Growth Outlook
According to the HSBC Mutual Fund report, India's investment cycle is expected to remain strong, driven by continued government spending on infrastructure and a recovery in private capital expenditure. The fund house projected India's growth to stay resilient in the face of global macroeconomic headwinds, with the investment cycle on a medium-term uptrend.
Potential trade agreements with the European Union (EU) and the United States were cited as likely catalysts for manufacturing growth and export competitiveness — a development that could meaningfully alter India's positioning in global supply chains if deals are concluded.
Valuation and Near-Term Risks
The report noted that Nifty valuations are currently trading near their 10-year average levels, offering a relatively balanced entry point compared to the premium multiples seen in 2021–22. However, the fund house flagged several near-term headwinds: ongoing geopolitical tensions, elevated crude oil prices, a weaker rupee, and below-normal monsoon forecasts — each of which could weigh on corporate earnings and consumer demand.
Debt Market Stance and RBI Outlook
On fixed income, HSBC Mutual Fund maintained a neutral to underweight stance on duration positioning, citing market uncertainty stemming from high oil prices and geopolitical risks that pose both inflation and growth challenges. The fund house identified 2–3 year corporate bonds and certificates of deposit as attractive segments, while noting that longer-end government securities could benefit from a potential yield curve flattening.
The Reserve Bank of India (RBI) is expected to maintain a prolonged pause on policy rates, according to the report, while keeping liquidity conditions supportive — a stance consistent with the central bank's recent signalling.
What to Watch
With Nifty valuations near historical averages and the investment cycle gaining traction, the medium-term case for Indian equities appears intact, according to the fund house. Monsoon progress, crude oil trajectory, and the outcome of ongoing trade negotiations with the EU and the US will be key variables to monitor in the months ahead.
Point of View
But both carry execution risk: private capex recovery has been repeatedly forecast and repeatedly delayed, and trade negotiations with the EU have been in progress for over a decade. The RBI's prolonged rate pause keeps the liquidity floor in place for now, but elevated crude and a weakening rupee are a combination that has historically eroded India's macro stability faster than equity markets price in. The medium-term case is credible; the near-term froth in small and midcaps warrants caution.
NationPress
29 Jun 2026
Frequently Asked Questions
What does HSBC Mutual Fund's report say about Indian equities?
HSBC Mutual Fund's May 2025 report describes the long-term outlook for Indian equities as constructive, citing a strong investment cycle supported by infrastructure spending and private capex recovery. The fund house also pointed to potential trade deals with the EU and the US as tailwinds for manufacturing and exports.
How did Indian stock markets perform in April 2025?
Indian markets staged a sharp recovery in April 2025, with the Sensex rising 6.9 per cent and the Nifty gaining 7.5 per cent. The BSE Smallcap index surged 19.6 per cent and the NSE Midcap index gained 13.2 per cent, with power, realty, and capital goods leading sectoral gains.
What are the near-term risks flagged for Indian markets?
HSBC Mutual Fund flagged geopolitical tensions, elevated crude oil prices, a weaker rupee, and below-normal monsoon forecasts as key near-term risks. These factors could weigh on corporate earnings and consumer demand even as the long-term outlook remains positive.
What is the RBI expected to do with interest rates?
According to the HSBC Mutual Fund report, the Reserve Bank of India is expected to maintain a prolonged pause on policy rates while keeping liquidity conditions supportive. This stance aligns with the central bank's recent communications amid global macro uncertainty.
Which debt market segments does HSBC Mutual Fund find attractive?
The fund house identified 2–3 year corporate bonds and certificates of deposit as attractive fixed-income segments. It maintained a neutral to underweight stance on duration, while noting that longer-end government securities could benefit from a potential yield curve flattening.
