HSBC Research Thinks underperformance will now come to an end. Here’s why:
India’s valuation premium to Asia has declined and is now approaching a 10-year average premium. The hype is almost gone.
Domestic liquidity is improving due to several measures announced by the central bank.
Investor holdings have come down (which we view as a positive).
High-frequency data suggests that growth might improve in 2H16.
A normal monsoon year for 2016 bodes well for rural demand.
HSBC upgrade IT to overweight and Industrials to neutral. Downgrade Healthcare to neutral on high earnings expectations and rich valuations. Remain overweight on Consumer Staples and Utilities; neutral on Energy and Consumer Discretionary; and underweight on Financials (they prefer private banks), Materials and Telecoms.
