Global brokerage firm Goldman Sachs has turned positive on Indian equities, upgrading India to “overweight” on Monday, November 10. This change in outlook comes 13 months after the firm had downgraded its stance to “neutral” in October 2024.
The brokerage has now set a Nifty50 target of 29,000 by December 2026, suggesting a potential upside of about 14% from Friday’s closing levels. The upgrade reflects the firm’s belief that India’s equity markets are well-positioned for recovery, supported by policy easing, improving earnings, and better investor sentiment after a year of underperformance.
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Goldman Sachs has identified financials, consumer staples, defence, and oil marketing companies (OMCs) as the key themes for investors to focus on over the next year. The brokerage expects these sectors to lead the next phase of growth, supported by domestic demand, capital expenditure, and strong corporate balance sheets.
However, it has also cautioned about risks, including earnings shortfalls, external headwinds, and investor uncertainty about the impact of artificial intelligence (AI) on business models.
In a note authored by Sunil Koul, Goldman Sachs stated, “As the year progressed and earnings cuts materialised, tariff headwinds soured sentiment further and led to large foreign desrisking. We now see a case for Indian equities to perform better over the coming year.”
WHY GOLDMAN SACHS TURNED BULLISH
The firm’s positive view follows India’s recent efforts to support economic growth. Goldman Sachs said that the Reserve Bank of India’s easing measures, GST cuts, and slower fiscal consolidation should help India’s economy recover over the next two years.
It also noted that the current Earnings Per Share (EPS) downgrade cycle, which lasted longer than usual, appears to have stabilised. “India’s EPS downgrade cycle has lasted longer than the typical median cycle of 10 months and has stabilised over the last three months,” the note said. The firm added that corporate results so far have been better than expected, leading to selective earnings upgrades in certain sectors.
Goldman Sachs expects MSCI India’s profits to grow from 10% this year to 14% next year, driven by a better nominal growth environment.
Despite India’s strong economic fundamentals, its equity markets have underperformed emerging markets in 2025. So far this year, Indian equities are up just 3% in US dollar terms, compared to a 30% rise in broader emerging markets, the report noted.
Goldman Sachs attributed this underperformance to high valuations, cyclical growth pressures, and profit slowdown expectations, calling it the largest underperformance in two decades.
However, the firm believes that the cycle is turning. “Recent reversals suggest improving foreign risk appetite and flows as earnings recover,” Koul wrote, adding that a possible easing in US trade tensions could further improve investor sentiment towards India.
FOREIGN FLOWS SHOW SIGNS OF RETURNING
According to the report, foreign investors have sold over USD 30 billion worth of Indian equities in the past year. This has pushed foreign ownership and mutual fund allocations to their lowest levels in nearly 20 years.
Goldman Sachs believes this trend could soon reverse. It expects foreign risk appetite to improve as corporate earnings recover and macroeconomic indicators strengthen.
The report also pointed out that India’s valuation premium over Asia has normalised to around 45%, compared to its peak range of 85% to 90%, which could make Indian stocks relatively more attractive to global investors.
At around 23 times price-to-earnings (P/E), Indian markets continue to trade at a premium compared to peers. However, Goldman Sachs said that there is limited downside or de-rating risk, as valuations are supported by earnings growth and a stable macro outlook.
The brokerage used six different valuation models to assess India’s equity market positioning and concluded that the current premium is justified by strong earnings resilience and long-term growth potential.
Goldman Sachs’ upgrade is expected to boost market confidence, especially at a time when global investors have been cautious about high valuations and slower profit growth in India. With a target of Nifty 50 at 29,000 by December 2026, the brokerage’s bullish stance suggests that India’s market may soon regain momentum if growth stabilises and foreign flows return.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)
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