The Bombay Stock Exchange (BSE) building is seen behind a traffic signal at a junction in Mumbai, India. (Photographer: Prashanth Vishwanathan/Bloomberg News)

HSBC Says Prepare For Next Leg Of Bull Run; Recommends Top Stock Picks

HSBC wants investors to prepare for the next leg of the bull run in Indian equities.

The S&P BSE Sensex is set for its best weekly performance in four-and-half months, bringing its gain for this year to 5.3 percent. The NSE Nifty 50 increased 5.1 percent.

Both indices are headed for monthly gains amid optimism Prime Minister Narendra Modi’s government may win another term when election results are announced in May.

According to HSBC, many of the elements needed for the next leg of the upmove in equities are in place, citing market cycles of the past 20 years. “In a non-consensus call, our analysis… shows that investors should be prepared for the start of the next bull market,” said Herald van der Linde, head of equity strategy for Asia Pacific, HSBC.

HSBC said earnings growth in India remains among the strongest in the region—and the fastest growing major market in Asia—due to margin expansion. And their optimism also stems from the relative valuations and relatively low exposure of foreign funds in Indian equities. The bank has placed an ‘Overweight’ rating on India with a 2019-end Sensex target of 40,300.

HSBC Says Prepare For Next Leg Of  Bull Run; Recommends Top Stock Picks
HSBC Says Prepare For Next Leg Of  Bull Run; Recommends Top Stock Picks

The report predicts a consensus earnings per share growth of 24 percent in 2019.

Van der Linde said the consumer discretionary and financials sectors are growing the fastest in the country. That’s due to:

  • Normalisation of credit costs and market share gains.
  • Retailers expect strong sales growth.
  • Automobile sector expects earnings recovery, given lower inventories and price hikes.

HSBC said that a surprise election outcome and oil prices over $80 per barrel are the key risks to their predictions.

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