HSBC’s India Five comes amid the absence of strong positive catalysts and weak growth, but it cites opportunities in the divergence of stock performance. HSBC is more worried about the weak domestic demand and stretched valuations.
“While we typically are quick to identify five standout stock ideas in India, this month it’s been much harder. Analyst conviction levels feel like they are down amid weak growth across the board, and headlines around high tariffs don’t help either. We find India to be more of a stock picker’s market than one driven by top-down macro,” the brokerage noted.
It notes that the current market is a “stock picker’s market”, meaning that the best bets hinge on selecting individual strong companies rather than relying on broad market trends. Here are the firm’s key picks, focusing on companies that show resilience and growth despite the tough times.
HSBC’s India Five Stock Picks
Trent
A key player in the retail sector has been picked for its compelling growth story driven by Zudio’s store additions and growth trajectory in a consumer-driven market.
While competition is increasing, the analyst does not expect rivals to dent Zudio’s market leadership given its strong brand, fashion collection refresh frequency, and store reach.
Infosys
The company stands out in the IT sector amid the macroeconomic uncertainty, as it outperformed its peers. HSBC expects the company to incrementally continue to do better and waive off valuation concerns.
The analyst expects margins to remain resilient despite the ramp-up of large, well-fought deals. Over the past few years, Infosys has faced multiple headwinds in terms of senior management attrition and deal losses, which now appear to be behind it, according to HSBC.
Godrej Consumer Products
This FMCG giant is a solid pick, citing its innovation capabilities, and is gaining market share in the home insecticides business.
HSBC notes that the company sees significant total addressable market growth from various product segments, like deodorants and air sprays. They note that a competitive strategy is needed to grow and capture value in the future.
State Bank Of India
SBI earns a place in the list because government-owned banks are placed better than large private banks given strong balance sheet liquidity, according to the brokerage.
The brokerage notes that the SBI could deliver better asset quality versus private peers. Factors like an increase in LDR, a lower share of external benchmark-linked books, and cuts in savings and term deposit rates would protect SBIN’s NIM better than large private banks.
Phoenix Mills
This notable real estate player emerges as the final pick after the company refreshes in legacy malls, and the stock offers attractive valuations after its correction.
HSBC notes that the market is sceptical of the company’s ability to lease its new office portfolio. Any positive surprise on this can potentially drive a stock re-rating. Over the longer term, the company, which is one of the best mall operators, is building a strong and diversified portfolio of retail space, office space and hotels.
Zooming out to the broader markets, the report maintains a neutral stance on the Indian market from a regional perspective, setting a 2025-end target of 85,130 for the Sensex.
Uncertainties over tariffs have surfaced when market sentiment is already frail. However, less than 4% of sales for all BSE500 companies come via exports of goods to the US, HSBC highlighted, as they see a limited impact of proposed tariffs on corporate growth.
As far as the growth slowdown goes, the analyst expects growth to settle in the high single digits, which is not exciting given India is the most expensive emerging market. The oversupply of equities will remain a drag until demand picks up considerably, they added.
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