Sinclair only signed for the Hornets in July, having left Liverpool at the end of his contract. However, the signing of Anderlecht's Stefano Okaka looks set to further limit his chances of immediate first team football, with Troy Deeney and Odion Ighalo already ahead of him in the pecking order.
The 19-year-old is likely to fare far better in the second tier, not least at Norwich City, who are set to sell Steven Naismith to Sunderland (Daily Mail).
Sky's report does not name the other interested parties, although Bristol City, Leeds United and Reading could also be in the market for a new striker, based on a report in Wednesday's Sun newspaper (page 53).
Bristol City sold Jonathan Kodjia (left) to Aston Villa on Tuesday
The trio, along with Derby County - who recently signed forwards James Wilson and Matej Vydra, are all said to be keen on Bournemouth's Lewis Grabban.
Sinclair, who joined Liverpool as a 15-year-old from West Bromwich Albion, has made just six career appearances to date - including one on loan to Wigan Athletic.