Global brokerage HSBC has turned cautious on Indian equities, downgrading its stance from Overweight to Neutral amid concerns over steep valuations and slowing growth momentum. The revised outlook reflects expectations of muted near-term market gains, with HSBC lowering its Sensex target for the end of 2025 to 85,990—down from the earlier projection of 90,520. This still represents a modest 10% upside from the January 8 closing level of 78,148.49. HSBC’s tempered optimism comes as India’s robust earnings growth story faces a reality check. After years of annualized earnings growth of around 25%, the pace has decelerated sharply, prompting the brokerage to slash its FY25 Nifty 50 earnings growth forecast from 15% to a mere 5%. HSBC cited potential downside risks to growth, compounded by a cyclical slowdown and recalibration of high earnings multiples. The Indian stock market has seen a significant pullback since peaking in September 2024, with the FTSE India Index down 12% in USD terms and benchmark indices Sensex and Nifty 50 falling about 10% from their record highs. This correction follows nine consecutive years of annual gains, with foreign investors retreating from richly valued stocks as earnings disappoint. Since September 2024, foreign fund outflows have totaled $12 billion, although resilient domestic demand has helped cushion the blow. HSBC’s downgrade is not a rejection of India’s long-term potential but rather a reflection of its cautious near-term view.