HSBC Global Private Banking's investment outlook report for H1 2024 released on January 10, 2024, predicted 6 per cent GDP growth for India this year and 18 per cent EPS growth in 2024.
"We expect India’s 6 per cent GDP growth this year will support a robust 18 per cent EPS growth in 2024. We believe the premium valuation of Indian equities at 20x forward earnings is well supported by its high RoE of 16 per cent, well above the 10.7 per cent Asian regional average ROE.," the report said.
James Cheo, Chief Investment Officer for Southeast Asia and India, Global Private Banking and Wealth, HSBC, emphasises India's industrial renaissance as the most promising structural growth story in Asia. "We expect the rise in India’s new economy sectors – high-tech services, digital start-up ecosystem, services exports – could raise its potential growth to 6.5 per cent in the next 10 years, up from an average 6 per cent growth before the pandemic. India’s strong government spending and private investment growth, robust FDI inflows and booming services exports will continue to power employment, private consumption, and productivity gains,” Cheo said.
The report predicts Fed rate cuts in June 2024, a probable US soft landing, corporate earnings recovery, and robust growth in Asia, to improve global risk appetite and investment outlook of equity and bond markets in 2024.
HSBC Global Private Banking sees two positive drivers supporting global financial markets. Firstly major Western central banks have done with rate hikes amid continued disinflation and the US economy is heading for a soft landing. These two positive developments should support the recovery of global risk appetite in 2024, the report said.
In the Indian stock market, HSBC recommends Indian banks, consumer discretionary and IT companies which benefit from the booming digital economy, consumer spending and service exports.
India has consistently delivered stronger-than-expected growth in manufacturing and service activities throughout 2023, with strong FDI inflows and booming services exports powering employment, private consumption, and productivity gains, says Cheo. Apart from India, in Asia, HSBC cited Indonesia with huge growth opportunities.
On the fixed income front, the report gave a bullish outlook on Indian local currency bonds. This positive assessment is based on favourable liquidity drivers from the global EM bond index inclusion, strong structural growth of the economy and likely rate cuts by the Reserve Bank of India in the second quarter of this year. HSBC report forecasts a stable Indian Rupee at 84.0 against the US Dollar by the end of 2024.