Foreign Brokerages Cut India Ratings as Nifty Falls 3rd Day

HSBC has made a tactical shift in its Asia equity strategy — trimming exposure to India to fund a bigger bet on South Korea. As per The Economic Times, the bank's Chief Asia Equity Strategist Herald van der Linde emphasizes this is not a verdict on India's long-term story but simply a matter of where the growth is more compelling right now. At the start of 2026, South Korea's earnings growth was forecast at 50% but has since surged past 200%, creating a momentum that is difficult for any fund manager to overlook. Van der Linde notes that positioning in Korea had become dangerously crowded earlier in the year, but the volatility of March cleared that out — creating a fresh entry point. India, by contrast, is being used as the funding source for this tactical reallocation, at least for now. The more important message for Indian investors is that earnings have stopped falling after a prolonged cycle of downgrades through 2025, with the trajectory turning upward.

J.P.Morgan has downgraded Indian equities from 'overweight' to 'neutral' citing a combination of valuation concerns, earnings risks, and limited exposure to emerging technology themes. As per The Hindu BusinessLine, the brokerage stated in its latest Asia strategy report that 'we downgrade Indian equities to Neutral due to elevated valuations relative to EM peers, earnings risks, dilution concerns and limited exposure to next-gen tech.' The report highlighted that 'earnings at risk - energy supply disruptions are likely to pressure earnings through multiple channels,' noting that it has already revised down earnings estimates across sectors. HSBC has also cut its rating on India to 'underweight' from 'neutral', citing macroeconomic vulnerabilities linked to energy dependence and inflation risks, stating that 'given India's reliance on imported energy and the potential knock-on effects on inflation and domestic demand, we are concerned about the durability of the ongoing earnings recovery.' Goldman Sachs has also downgraded Indian equities to 'marketweight' from 'overweight', citing a worsening macro mix due to sustained high energy prices, while Nomura has highlighted that disruptions in the Strait of Hormuz could have a significant macro impact, given the route accounts for 20-25% of global oil trade.

J.P.Morgan has significantly revised its target price scenarios, now projecting the Nifty 50 could drop to 20,500 in a worst-case scenario, representing a fall of around 15% from current levels. The brokerage has cut its year-end target for the benchmark Nifty 50 by 10% to 27,000, with updated projections showing 30,000 in a bull case, 27,000 in a base case, and 20,500 in a bear case. The sell-off unfolded against a deteriorating global backdrop, with Brent crude climbing above $100 a barrel as the standoff at the Strait of Hormuz showed no signs of easing. J.P.Morgan estimated that an extreme oil scenario of $120 per barrel could shave 2% off GDP and 3% off earnings. The rupee added to investor worries, weakening past the 94.2 mark against the dollar - its fifth straight day of losses and the sharpest weekly drop since September 2022. The slide has been driven by a combination of sustained foreign institutional outflows and rising import costs from elevated crude prices.

J.P.Morgan has flagged significant risks to company earnings, with analysts cutting FY27 earnings estimates by 2% to 10% across key segments. The brokerage has lowered its MSCI India earnings growth forecasts for CY26E and CY27E to 11% and 13% respectively. Within India, J.P.Morgan prefers sectors like financials, materials, consumer discretionary, hospitals, defence and power, while remaining cautious on IT and Pharma. HSBC also warned that valuations, while off their peak, could remain stretched as earnings forecasts are revised downward. Nomura has cut its December 2026 Nifty target to 24,900 and flagged the possibility of an additional 5% correction in equities, warning of 10-15% downside risk to earnings if oil remains elevated. Goldman Sachs has cut its Nifty 12-month target to 25,900 from 29,300 earlier, even as it trimmed earnings growth forecasts by 9 percentage points over two years. The brokerages noted that India's large-cap companies have limited presence in fast-growing sectors like artificial intelligence, data centres and semiconductors, especially compared to markets such as the US, Korea, China and Taiwan.

Market expert Narendra Solanki from Anand Rathi Shares & Stock Brokers expects markets to remain range-bound in the near term with no sharp directional moves, projecting a 2% to 3% kind of range of consolidation happening as earnings season unfolds. According to The Economic Times, the disappointment, particularly around forward guidance, has weighed heavily on IT stocks, with the Nifty IT index now trading at the lows which were seen in mid-March, effectively erasing its recent gains. However, the broader market has displayed resilience, with most heavyweight sectors—especially IT and banking—having already reported earnings, and the focus is now shifting toward a wider set of companies. Solanki notes that 'we are more focused on smallcaps and midcaps because that is where the companies are more agile and that is where the bases are low, so it really helps them in order to turn around and strategise in a fast manner in comparison with their largecap peers.' Key investment themes emerging include power and infrastructure sectors, autos—especially two-wheelers and related ancillaries, and financials. Despite the cautious stance, HSBC sees selective opportunities in segments such as private banking, base metals and healthcare, while Goldman Sachs maintains that quality stocks with strong balance sheets and stable earnings could outperform.