Goldman Sachs has upgraded India’s market outlook from “neutral” to “overweight,” thus reversing its October 2024 downgrade. This change reflects strengthening earnings momentum, supportive government policies, and a favorable economic environment that the investment bank expects will help propel India’s benchmark Nifty 50 index to 29,000 by the end of 2026-an approximate 14% upside from current levels.
The Nifty 50 has gained about 8.5% this year, lagging its peers in other emerging markets despite one of the best years for global equities. Analysts at Goldman Sachs, led by Sunil Koul, argued that a prolonged cycle of earnings downgrades seems to have reached a trough, setting the stage for a rebound in corporate profits. The outlook is based on an array of monetary and fiscal measures to help keep growth going, including interest rate cuts by the Reserve Bank of India, liquidity easing, deregulation of the banking sector, GST cuts, and a more gradual pace of fiscal consolidation.
Goldman Sachs said recent quarterly results have mostly topped estimates and triggered upward revisions in earnings forecasts for some sectors. The bank adds that financials, consumer staples, durables, automobiles, defence, oil marketing companies, and internet and telecom firms are likely to lead this recovery. However, sectors with high exports, such as IT services, pharmaceuticals, industrials, and chemicals, are expected to remain challenged due to cooling global demand and subdued public capex.
Goldman Sachs is expecting the market to bounce back, despite a net outflow of foreign portfolio investment, estimated to be $30 billion since the Nifty’s 2024 peak and $17.4 billion so far in 2025. Domestic institutional activity has cushioned the market, supported further by record equity buys worth $70 billion, steady retail participation, and SIP inflows.
Valuation remains an important consideration. India’s equity market premium over other emerging markets has come off sharply since September 2024 and, though still among the highest in the world, is more justifiable for investors. Goldman Sachs stresses that investment opportunities are now focused in domestic self-sufficiency, revival in mass consumption, high-growth “new economy” sectors, and other growth pockets offering fair valuations. For the firm, these themes are central to strong returns amidst rising geopolitical and trade uncertainties.
The upgrade by Goldman Sachs follows a similar upward assessment in late September by HSBC, which cited improving earnings and supportive policy measures as drivers for optimism in the Indian market. Both underscore a more positive outlook for equities, driven by policy tailwinds, combined with corporate earnings momentum, but take into consideration risks associated with export-oriented industries and volatile global macroeconomics.
This has been particularly so in India’s policy environment. The slew of easing measures taken by the Reserve Bank of India, together with strategic fiscal interventions and GST rationalizations, aims at spurring consumption and investment. These, in addition to domestic banking reforms and improved liquidity, have all combined to inspire a degree of renewed confidence in the market.
The outlook reflects the broader structural trends in India’s economy, too. With rising domestic consumption and the expansion of the middle class, technological adoption across sectors has created resilient growth vectors. Meanwhile, targeted investments in infrastructure, renewable energy, and defence are expected to sustain sectoral growth over the medium term. A note by Goldman Sachs, however, underlines that while foreign capital flows have been volatile, domestic investors are increasingly stepping into the gap to make up for lost capital, a sign of a maturing, more resilient financial market. This dynamic is likely to stabilize, even as global uncertainties, such as trade tension and geopolitical risks, abound. All in all, the upgrade reflects strong earnings surprises, favorable policy measures, resilient domestic investment flows, and fairer relative valuations compared to the past. All these factors are likely to lure both domestic and international investors looking for opportunities in such high-growth sectors as India continues to grow into a big emerging market. Goldman Sachs’ upgrade is indicative of its renewed confidence in the trajectory of India’s equity market, with the Nifty 50 likely to reach 29,000 by the close of 2026.
