Goldman Sachs has upgraded its outlook on Indian equities to “Overweight,” forecasting the Nifty 50 to reach 29,000 by the end of 2026. This implies a potential 14% upside from current levels—a bullish signal after a period of relative underperformance against other emerging markets.

Key Reasons Behind the Upgrade

Goldman Sachs’s renewed optimism for India is driven by several factors:

• Accelerating Growth Momentum: The report highlights a revival in India’s growth, supported by proactive monetary and fiscal policies. The Reserve Bank of India (RBI) is expected to cut rates, ease liquidity, and pursue deregulation in banking.

• Fiscal and Policy Support: Measures like GST rate reductions and a slower path to fiscal consolidation should spur domestic demand over the next two years.

• Earnings Rebound: Recent corporate earnings, especially for the September quarter, have outperformed expectations. This earnings momentum is projected to accelerate, with MSCI India profit growth estimates rising from 10% in 2025 to 14% in 2026.

Recent Market Dynamics

• Previous Downgrade Reversed: Just a year ago, Goldman Sachs had downgraded India based on concerns about high valuations and slowing earnings. This has now reversed as valuations have moderated and earnings growth has picked up.

• Foreign Investor Trends: There were significant outflows from foreign portfolio investors—about $30 billion—which caused Indian equities to underperform other emerging markets by 25 percentage points over the past year. However, there are signs of renewed foreign interest as risk appetite returns.

Sectors to Watch

According to Goldman Sachs, the next market uptrend will likely be driven by:

• Financials

• Consumer durables

• Defence

• Technology, media, and telecom (TMT)

• Oil marketing companies

Macro Factors Supporting Demand

Several broader economic and policy developments are expected to boost consumption:

• Low food inflation and a strong agricultural cycle

• GST rate reductions

• Upcoming state elections, which often drive populist spending

• The potential for the 8th Pay Commission wage hikes, raising disposable income across the economy

Takeaway for Investors

Goldman Sachs’s upgrade underscores a significant shift in sentiment for Indian equities. If the global investment bank’s projections play out, investors could see robust returns led by policy support, earnings uptick, and renewed international inflows. Sectors related to finance, consumption, defense, TMT, and oil marketing are especially well-placed for the next leg of the rally.

source financialexpress