New Delhi: Global brokerage firm Goldman Sachs has changed its perspective on the Indian stock market. The firm has upgraded India from ‘neutral’ to ‘overweight’ rating. This upgrade comes after about 13 months. In October 2024, the firm termed India as ‘neutral’. Goldman Sachs has now set the target of Nifty 50 at 29,000 points by December 2026, which is a possible increase of about 14 percent from the current level.
Goldman Sachs believes that the Indian equity market is now ready for a recovery. Factors like policy relaxation, better earnings growth and return of investor confidence are working behind this. The firm said that the recent steps taken by the RBI to support India’s economy, GST cuts, and slow fiscal consolidation will accelerate growth in the coming two years. Along with this, Goldman Sachs wrote in his report that as the year progressed, earnings cuts and tariff challenges weakened investor sentiment. Now we think that the Indian equity market will perform better in the coming years.
Goldman Sachs bullish on Indian market
According to the report, the Earnings Per Share (EPS) downgrade cycle in India seems to be stabilizing now. Normally, this cycle lasts about 10 months, but this time it lasted much longer and now it has been showing stability for the last three months. According to the firm, the corporate results have been better than expected, which has led to upgrading earnings in some sectors. Goldman Sachs expects MSCI India’s profit growth to rise from 10 percent in 2025 to 14 percent in 2026. This improvement will be made possible by better nominal growth and stronger domestic demand.
The main sectors that the brokerage firm has advised investors to focus on are —
- Financials (Banking & NBFCs)
- Consumer Staples
- Defence Sector
- Oil Marketing Companies (OMCs)
Goldman Sachs believes that these sectors will benefit from capex growth, strong balance sheets and domestic demand next year.
According to the report, the Indian equity market has performed less than emerging markets in 2025. While other emerging markets are up 30 percent, the Indian market has grown only 3 percent in dollar terms. Goldman Sachs described it as the biggest underperformance of the last two decades. The reason for this was. Fear of high valuation, cyclical growth pressure, and profit slowdown. However, now the firm feels that this cycle is changing. According to the report, recent indications suggest that foreign investors’ risk appetite and fund flow are improving, as earnings are showing recovery.
Signs of the return of foreign investment
According to the Goldman Sachs report, foreign investors (FIIs) have sold more than 30 billion dollars of Indian shares in the last one year. This has brought foreign holdings and mutual fund allocation to a nearly 20-year low. Now the firm hopes that this trend will reverse due to low valuation and earnings recovery.
The report states that India’s valuation premium is now limited to 45 percent compared to Asian markets, whereas earlier it was between 85 percent and 90 percent. With this, Indian stocks are now looking relatively cheap for global investors.
Indian Stock Market Valuation and Outlook
The Indian market is currently trading at 23 times P/E multiple, which is higher than other emerging markets. But Goldman Sachs says that the risk of downsides is limited, because earnings growth and a stable macro outlook are supported by the valuation.
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