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India Perspectives - Riding on the festive spending wave

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India Perspectives
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India Equity
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India Perspectives - Riding on the festive spending wave

by Abhilash Narayan, Investment Strategist, HSBC Private Bank and Premier Wealth ; James Cheo, Chief Investment Officer, Southeast Asia and India, HSBC Private Bank and Premier Wealth
Nov 11, 2025

Highlights: The sentiment towards India has turned incrementally positive over the past month, driven by increased optimism around a potential trade agreement with US, and the bounce in consumer spending during the festive season, aided by the GST rate cuts. We retain Neutral stance on Indian equities given still elevated valuations, modest earnings growth and mixed technicals. We are bullish on INR local currency bonds as we expect RBI rate cut to help push yields lower.

  • GST rate cuts implemented on 22 September appear to have provided boost to consumer spending in the festive month between Navratri and Diwali, based on media reports, UPI and e-commerce transactions. However, economic data, especially trade deficit and PMIs point towards increase in near-term downside risks
  • Inflation fell to 1.5 per cent in September, driven by lower food prices. We expect inflation to remain subdued, allowing the RBI to cut rates by 0.25 per cent to 5.25 per cent in the December Monetary Policy Committee (MPC) meeting
  • We are Neutral on Indian equities. The subdued earnings in the ongoing earnings season reaffirms our view that earnings growth continues to a be drag for the markets, especially given the elevated valuations. Foreign investor flows are yet to return and the surge in Initial Public offerings is drawing the liquidity provided by domestic investor flows, leading to a mixed technical picture We retain our preference for Large-cap stocks. We favour domestically oriented sectors and are overweight on consumer discretionary, financials and industrials. However, we reduce Healthcare to neutral owing to more balanced risk-reward
  • We are bullish on Indian local currency bonds. We view the current yields as an attractive entry point. Easing of supply concerns, potential RBI rate cuts and open market operations and resumption of foreign inflows should help push yields lower over the next 6 months. We are neutral on INR and expect USD/INR to edge towards 86.5 by mid-2026

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