Goldman Sachs Upgrades Indian Equities to Overweight Following Subpar Performance in 2025

Goldman Sachs has shifted its stance on Indian equities to overweight, anticipating increased interest in stock purchases. The brokerage predicts the NSE's Nifty 50 index will climb to 29,000 points by the end of 2026, marking a 14% rise. This change follows a lacklustre performance in 2025, where Indian equities rose only 3%, despite emerging markets experiencing over a 30% rally.

The underperformance of Indian equities, the largest in two decades, was attributed to high starting valuations and expectations of cyclical growth and profit slowdowns. Goldman Sachs had downgraded its outlook on India in October last year due to these factors but is now reversing its position. The brokerage sees potential for better performance in the coming year.

Factors Influencing the Upgrade

Goldman Sachs highlighted several reasons for upgrading its view on Indian equities. Growth-supportive policies, such as rate cuts by the Reserve Bank of India (RBI), improved liquidity, and bank deregulation, are expected to boost market performance. Additionally, earnings revivals and significant under-positioning in the market have contributed to this positive outlook.

The brokerage noted that foreign investors have sold off USD 30 billion worth of Indian equities, leading to large-scale de-risking. However, as earnings cuts materialised and tariff headwinds affected sentiment, there is now a case for Indian equities to perform better over the next year.

Sector Preferences

Goldman Sachs expressed a preference for certain sectors within the Indian market. It favours stocks in financials, consumer goods, oil marketing companies, and defence as promising investments for the upcoming year. These sectors are expected to benefit from the supportive economic policies and market conditions.

The brokerage's revised outlook comes after a challenging period for Indian equities. Despite being one of the strongest years for emerging markets overall, India's performance lagged significantly. This shift in perspective reflects optimism about India's economic prospects and potential for recovery.

As Indian equities prepare for a potential upswing, investors may find opportunities in sectors poised for growth. The combination of policy support and market dynamics could drive improved performance in the coming months.

With inputs from PTI