HSBC has raised India to “neutral” after being “underweight" since April 2015.

It says the period of India's underperformance relative to Asia is set to end as valuations premium to region has declined substantially.

The brokerage adds that domestic liquidity is improving on RBI measures. It also points to signs emerging of green shoots in the economy.

A normal monsoon will bode well for rural demand, HSBC said.

It adds there is still room for caution on India given the absence of more concrete signs of economic recovery.

It says “valuations have become more reasonable, but are still far from attractive", and adds earnings may still underperform compared with expectations.