Indian equities are returning to global investors’ radar as valuations become more reasonable. Investors are also showing greater willingness to look beyond crowded artificial intelligence (AI) themes, according to HSBC.
The brokerage said India offers diversification because its economy is largely domestically driven. Its limited direct exposure to the AI trade also acts as a hedge against volatility in AI-heavy markets.
“Financials provide the best risk-return, but we also like industrials for their growth opportunities,” said Herald van der Linde, HSBC’s head of equity strategy for Asia Pacific.
The note reflects a broader change in how some global investors are approaching Asia. For months, capital had rotated into markets seen as bigger beneficiaries of the AI build-out.
That trade has become increasingly concentrated. It has also become more volatile. HSBC said this has prompted investors to search for diversification.