Indian Stock Market Downgraded By HSBC Twice In A Month - Here’s Why

Brokerage house HSBC Securities has yet again downgraded India to underweight, maintaining a bearish view on Indian stock market in the midst of US-Iran war concerns and soaring oil prices fueling inflation linked concerns.

In a report dated April 23, HSBC downgraded India to 'underweight' after changing its stance to 'neutral' from 'overweight' on 31 March. This comes along with several other brokerages like Goldman Sachs, and Nomura, who've also downgraded Indian equities.

Simultaneously, it kept a bullish view on countries such as Hong Kong, Singapore, and Mainland China. Meanwhile, it maintained a neutral stance on Korean equities. "We fund our Korea upgrade by downgrading India," it noted.

Why Is HSBC Bearish On Indian Equities?

HSBC expects India's earnings recovery to be delayed amid the impact of higher crude oil prices. As of 1:07 PM, the WTI crude oil prices stood 0.32% at 96.16 per barrel. The Brent crude oil prices was 0.43% higher at 105.52.

HSBC expects India's earnings recovery to be delayed amid the impact of higher crude oil prices. Brent crude is up almost 40% since the Middle East war, which started in late February, and is currently trading above $100 a barrel, raising inflation and growth risks.

"Given India’s reliance on imported energy and the potential knock-on effects on inflation and domestic demand, we are concerned about the durability of the ongoing earnings recovery," said the brokerage.

It noted that the ongoing Middle East conflict has driven the attention on downside growth risks. While growth has shown signs of improvement in the last two quarters, HSBC now thinks the recovery from hereon will be delayed.

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HSBC said that the Indian government is likely to revise retail petrol and diesel prices higher once state elections conclude, as energy prices are likely to remain elevated in the months, resulting in a renewed rise in inflation, which could "undermine the gradual recovery in demand and contribute to higher non-performing loans (NPLs) across the lending sector, creating downside risks to 2026 earnings".

Notably, it stated the pertinent concerns among foreign investors include particularly the risk of rupee depreciation if oil prices remain high, alongside rising worries about the impact of artificial intelligence on India’s software services sector. Foreign portfolio investors have already sold $18.5 billion worth of Indian equities in 2026, following net outflows of $18.9 billion in the previous year.