HSBC: Policy and Valuation Driving Force, Strong Outlook for Indian Stock Market in 2026.

HSBC analysts pointed out in their research report that, driven by both growth-promoting policies and reasonable valuations, the Indian stock market is expected to show strong performance in 2026. Potential rate cuts by the Reserve Bank of India and factors such as declining inflation are likely to drive economic growth recovery in the coming quarters. India's high market valuations have been a concern for foreign investors. However, after a recent period of weak market performance, valuations have become more reasonable, and the premium relative to other emerging markets has returned to historical normal levels. Analysts believe that large-cap stocks currently appear attractive, and these stocks are expected to benefit as foreign capital flows back into the Indian market.