Global Brokerage Bullish on Indian Equities Once Again
In a significant shift of stance, the renowned global investment bank Goldman Sachs has upgraded its rating for the Indian stock market. The brokerage has moved its recommendation from "neutral" to "overweight", effectively reversing the downgrade it had issued back in October 2024. This optimistic revision is primarily driven by the firm's observation of a strengthening corporate earnings momentum and supportive government policies that are expected to fuel future growth.
Nifty Target and Key Drivers for the Upgrade
Goldman Sachs has set a definitive target for India's benchmark Nifty 50 index, projecting it to reach 29,000 points by the end of 2026. This ambitious forecast implies a potential upside of approximately 14% from the market's closing levels on the preceding Friday. The Nifty 50 has already gained around 8.5% since the start of the year, though it has trailed the performance of several other emerging markets.
The analysts at Goldman Sachs believe that the prolonged period of earnings downgrades has finally reached its bottom, setting the stage for a sustained recovery. They attribute this economic turnaround to a combination of growth-supportive measures, including anticipated interest rate cuts by the Reserve Bank of India (RBI), improved liquidity in the system, bank deregulation, reductions in the goods and services tax (GST), and a more measured pace of fiscal consolidation.
Furthermore, the brokerage highlighted that corporate earnings for the September quarter have largely surpassed expectations, leading to upward revisions in several key sectors.
Sectors to Watch and Investment Landscape
Goldman Sachs expects specific sectors to lead the market's charge. The bullish outlook covers financials, consumer staples, durables, automobiles, defence, oil marketing companies, and internet and telecom firms.
However, the firm advises caution regarding export-oriented sectors such as Information Technology (IT), pharmaceuticals, industrials, and chemicals. These areas are facing headwinds from moderating earnings and a potential slowdown in public capital expenditure.
A notable trend supporting the positive outlook is the record inflow from domestic investors. Despite Foreign Portfolio Investors (FPIs) selling a massive $30 billion since the Nifty's 2024 peak and another $17.4 billion in 2025 so far, this outflow has been more than offset by robust domestic equity purchases of about $70 billion. This surge is powered by consistent retail participation and steady inflows through Systematic Investment Plans (SIPs).
While India continues to trade at the highest valuations among its emerging market peers, Goldman Sachs notes that the valuation premium has reduced significantly since September 2024, making it more defensible. In the current climate of geopolitical and trade uncertainties, the brokerage emphasises investment themes centred on domestic self-sufficiency, a revival in mass consumption, and the expansion of new-economy sectors that offer high growth at reasonable valuations. This upgrade from Goldman Sachs follows a similar positive move by HSBC in late September.
