In the past two days, two global brokerages have downgraded India amid rising oil prices and persistent supply-side disruptions, flagging near-term headwinds for equities even as they retain confidence in the country's structural growth trajectory.

JP Morgan downgraded Indian equities to "Neutral" from "Overweight," citing a combination of valuation concerns, earnings risks and limited exposure to emerging technology themes. In its latest Asia strategy report, the brokerage said, "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 further 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. The brokerage also pointed to ongoing equity issuance, stating that "aggressive promoter stake sales and record capital issuance... cap upside potential," thereby diluting returns for existing investors.

Separately, HSBC downgraded India to "Underweight" from "Neutral," citing macroeconomic vulnerabilities linked to energy dependence and inflation risks. "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," the brokerage said.

HSBC added that elevated oil prices could weigh on growth and corporate profitability, warning that "a renewed rise in inflation could undermine the gradual recovery in demand and contribute to higher non-performing loans... creating downside risks to 2026 earnings." It also noted that valuations, while off their peak, could remain stretched as earnings forecasts are revised downward.

Both brokerages flagged that the current global environment--marked by geopolitical tensions and elevated crude prices--has shifted the risk-reward balance towards other emerging markets. JP Morgan observed that "we see better opportunities elsewhere in EM until valuations de-rate further or earnings visibility improves." Similarly, HSBC said India "looks less attractive than its North East Asian peers in the current macro environment."

However, despite the near-term caution, both institutions maintained that India's long-term fundamentals remain intact. JP Morgan emphasised that "India's structural growth story remains strong," supported by policy stability and sustained domestic inflows. The brokerages noted that while short-term pressures from energy shocks, inflation and global uncertainty may weigh on markets, India continues to benefit from a resilient domestic economy, ongoing reforms and a favourable long-term growth outlook.

Published on April 24, 2026