JPMorgan has downgraded Indian equities to 'neutral' from its earlier rating of 'overweight' and has also cut its price target on the Nifty 50 index across scenarios. The brokerage firm has cut its bull case price target to 30,000 from 33,000 earlier, while the base case target, which earlier was 30,000, has been cut to 27,000. Most significantly, the bear case price target for the benchmark index to 20,500 from 24,000 earlier. In a strategic move, JPMorgan has upgraded tech and Taiwan to 'overweight' and raised its targets for the TAIEX index. This downgrade comes just a day after HSBC downgraded India to 'underweight', marking the second downgrade in less than a month for Indian markets. According to The Economic Times, while India's long-term structural story remains intact, near-term tactical headwinds call for patience, with the valuation gap continuing to remain elevated despite some narrowing.
Indian stock markets opened in the red on Thursday, with Sensex falling 671 points, or 0.85%, to 77,845 as of 9:25 am, while Nifty dropped 179 points, or 0.74%, to 24,198. According to HSBC, the cautious opening mirrors the previous session's decline, with NSE's Nifty falling 205.05 points or 0.8% to close at 24,173.05 and BSE's Sensex declining 852.49 points, or 1.1%, to end at 77,664. All sectoral indices were in the red except pharma and oil and gas, with Nifty Auto and Consumer Durables the top losers, down 1.03% and 1.61% respectively. The subdued start comes despite record highs in Japan and South Korea, where markets rallied on Wall Street's overnight gains after President Donald Trump extended the ceasefire with Iran. US futures have since swung into the red after last night's upbeat session, with the Nasdaq dropping 1.6% from its record high, while German DAX futures point to a drop over 150 points at the open.
Oil markets remain a key concern as Brent crude reached $103.5 per barrel on Thursday, marking a fourth consecutive session of gains, with WTI advancing to $94.46. As a major oil importer, India faces significant economic risks if prices stay elevated, though domestic fuel prices have so far been held steady. HSBC's analysis shows a typical 20% rise in oil prices reduces corporate earnings by 1.5 percentage points, with historically a 10% increase in oil prices leading to a 1.3% decline in broader equity indices. The rupee compounds the damage: a 1% depreciation in the currency drags the market down by an additional 1%. With oil prices up around 55% since recent conflicts began and the rupee down approximately 3.5%, HSBC estimates the combined market impact at close to 11%. This is a direct reversal of HSBC's own thesis from December 2025, when the bank set a Sensex end-2026 target of 94,000 and rated India 'overweight', noting that the 'worst of the earnings downgrades seems to be behind us'.
Most sectoral indices opened lower, with Nifty Auto and Nifty Consumer Durables among the worst hit during Thursday's session. The broad-based decline saw heavyweights in the banking and financial services sectors lead the downturn, with indices tracking these segments falling over 1%. Major banking stocks like HDFC Bank, ICICI Bank, Bajaj Finance, and Kotak Mahindra Bank dragged the benchmarks lower, reflecting profit-taking and concerns over potential earnings impacts. The auto sector also experienced substantial losses, with the Nifty Auto index declining over 2%, a direct consequence of rising crude oil prices which increase input costs and can moderate demand. Aviation faces the most acute pressure, with analysts warning of net losses for the sector potentially reaching ₹17,000–18,000 crore in FY2026. For IndiGo specifically, each $1 rise per barrel in Brent crude cuts earnings per share by an estimated 13%, assuming fares are not raised, as government price controls prevent them from passing higher crude costs on to consumers. Oil marketing companies also face sharp headwinds, with HSBC downgrading BPCL to Hold and cutting its target price from ₹470 to ₹340, citing elevated crude oil prices expected to cause marketing losses.
HSBC has doubled down on its bearish view on Indian equities, downgrading it twice in less than a month as it sees US-Iran war clouds and subsequent oil price spike denting earnings recovery. HSBC expects India's earnings recovery to be delayed amid the impact of higher crude oil prices, with Brent crude up almost 40% since the Middle East war started in late February, currently trading above $100 a barrel. The brokerage noted that given India's reliance on imported energy and the potential knock-on effects on inflation and domestic demand, it is concerned about the durability of the ongoing earnings recovery. HSBC now thinks the recovery from hereon will be delayed, as growth has shown signs of improvement in the last two quarters but the ongoing Middle East conflict has refocused attention on downside growth risks. The Indian government is likely to revise retail petrol and diesel prices higher once state elections conclude, as energy prices are likely to remain elevated in the months, resulting in a renewed rise in inflation which could undermine the gradual recovery in demand and contribute to higher non-performing loans (NPLs) across the lending sector, creating downside risks to 2026 earnings. HSBC expects consensus forecasts to be revised down in the coming months from current expectations of 16% YoY for 2026.
Despite the bearish outlook, HSBC continues to see opportunities among private banks, base metals, and select healthcare companies. However, the brokerage highlighted significant concerns among foreign investors, particularly the risk of rupee depreciation if oil prices remain high, alongside rising worries about the impact of artificial intelligence on India's software services sector. Foreign portfolio investors have already sold $18.5 billion worth of Indian equities in 2026, following net outflows of $18.9 billion in the previous year. During Thursday's session, all eyes will be on the Nifty 50 heavyweight Infosys, which will announce its March quarter earnings later in the day. Investors will also watch results from mid- and small-cap names, including Union Bank of India, Adani Energy Solutions, Tata Capital LTM, Aditya Birla Sun Life AMC and Himadri Speciality Chemical for cues on sectoral momentum. Global cues remain mixed, with S&P 500 futures slipping 0.1% and Nasdaq 100 futures flat in early trade, while Dow Jones Industrial Average futures fell 173 points, or 0.4%.
