Goldman Sachs upgrades Indian stocks to 'overweight' on growth momentum

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Goldman Sachs upgraded India to "overweight" from "neutral", reversing its October 2024 downgrade, citing strengthening earnings momentum and policy tailwinds supporting growth.

The global brokerage has set a 2026 year-end target of 29,000 for the benchmark index Nifty 50, implying a 14% upside from Friday's close.

The index has risen about 8.5% year-to-date, lagging other emerging markets in one of their strongest years.

However, analysts led by Sunil Koul said the "year-long earnings downgrade cycle" has bottomed out, paving the way for recovery.

Goldman cited a combination of growth-supportive policies, including rate cuts by the Reserve Bank of India, liquidity easing, bank deregulation, goods and services tax (GST) reductions and a slower pace of fiscal consolidation, as key drivers for the turnaround, in a note post India market hours on Friday.

The brokerage noted that September-quarter results have largely surprised on the upside, prompting earnings upgrades in select sectors.

It expects financials, consumer staples, durables, autos, defence, oil marketing companies and internet and telecom firms to lead this recovery, while remaining cautious on export-oriented IT, pharma, industrials and chemicals amid earnings headwinds and moderating public capex.

Despite foreign portfolio investors selling about $30 billion since the Nifty's 2024 peak and $17.4 billion in 2025 so far, Goldman sees signs of a turnaround, helped by record $70 billion of equity purchases by domestic institutions backed by steady retail and SIP inflows.

With India's valuation premium to emerging markets now sharply lower compared to September 2024 levels, Goldman said it has become "defensible," even if India remains the priciest among peers.

Amid rising geopolitical and trade risks, Goldman highlighted themes such as domestic self-sufficiency, revival in mass consumption, new-economy sectors and high-growth pockets at fair valuations as key to generating strong returns.

Goldman Sachs' India upgrade follows a similar move by HSBC in late September, citing improving earnings and policy support.

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