5 stocks to buy: HSBC shares its 'India Five' list, sets Sensex target at 82,240

HSBC Global Investment Research in its latest strategy note said Indian markets are well-placed amidst global uncertainty and trade tensions. Its proprietary positioning data suggests Asia and GEM funds have started to rebuild positions in India -- cutting the underweights, but said global investors are still cautious. 

"A weaker dollar and softer inflation suggest the foreign inflows can persist in coming months. We are neutral on India from the Asian perspective with the 2025-end index target of 82,240 for the Sensex," the foreign brokerage said. 

Despite the earnings beat in the March quarter, HSBC said a sustained recovery in earnings growth is still a few quarters away. it noted that FactSet consensus has made sharp cuts to estimates and is now looking for 11 per cent growth in 2025e. 

"This could further surprise on downside; urban consumption remains weak, private capex has yet to see a pick-up, and growth in IT services could be weak amid policy uncertainties in the US. Rate cuts do not bode well for banks' margins, and this sector dominates the market index," it said.

5 stocks to buy
HSBC said it remains concerned about the growth outlook and find valuations elevated. This is after domestic benchmarks rebounded notably in the past few weeks on the back of lower domestic bond yields, now down to a 3-year low. 

"In this environment, we prefer stocks that we believe offer good growth, preferably for structural or idiosyncratic reasons," it said. 

HSBC said Godrej Consumer Products (GCPL) stands out for its innovation capabilities and is gaining market share in the home insecticides business. 

United Phosphorus Limited (UPL), it said, is on course for recovery. Surprises on growth, margins, and lower debt should drive further re-rating on UPL, HSBC said.

GAIL has underperformed in the market this year but HSBC believes it is structurally well-placed to benefit from a rise in demand for clean energy in the medium term. 

A potential gas tariff revision and more pipeline completions could be near-term catalysts, it said. 

"Ujjivan Small Finance Bank and HDFC Life benefit from the easing rate environment," HSBC added. HSBC said the central government and the central bank are both providing policy support. 

"Government capex surged to a record high in Q125, while the central bank has adopted a more pro-growth stance than anticipated. This is evident from the recent larger-than- expected cuts in the benchmark rate (50bps) and cash reserve ratio (100bps). This should bode well for domestic growth. Stable inflows from domestic investors provide another key support to equities," HSBC said.

Earnings growth - a sustained recovery will take time. Growth in the March quarter surprised -- EPS for FTSE India (ex-commodities) improved 10 per cent YoY, up from the single-digit growth in the last four quarters. 

"Industrials, healthcare and telecom reported strong growth. Consumer discretionary saw EPS grow 14 per cent on the back of strong numbers in retail and services. However, FMCG companies had another weak quarter because of soft demand and increased competition. Growth in banks and tech is tepid at 5-6 per cent YoY," HSBC said.