Goldman Sachs Upgrades India to Overweight, Sets Nifty Target at 29,000

Global investment bank Goldman Sachs has upgraded its rating on Indian equities to "Overweight" and set a Nifty 50 target of 29,000 by the end of 2026, implying a potential upside of around 14% from current levels. This upgrade comes 13 months after the bank downgraded India to "neutral" in October 2024 due to concerns over stretched valuations and a slowdown in earnings.

The latest report by Goldman Sachs points to a revival in India's growth momentum driven by supportive monetary and fiscal policies, an earnings rebound, and renewed foreign investor interest. This follows a period when Indian equities underperformed the broader emerging market basket, largely due to significant foreign portfolio outflows amounting to around $30 billion, which led to the largest underperformance gap in 20 years against MSCI Emerging Markets.

Goldman Sachs highlighted easing measures from the Reserve Bank of India including rate cuts, improved liquidity, and bank deregulation, along with targeted GST reductions and slower fiscal consolidation as factors expected to bolster domestic demand over the next two years. These policy supports and an improving earnings outlook underpin the positive stance.

Despite India's high valuation—at roughly 23 times forward price-to-earnings making it one of the most expensive markets in emerging economies—the bank anticipates only a moderate valuation correction, if any, over the next two years. Significant under-allocation by institutional investors and cooling valuations are seen as catalysts for potential market outperformance.

The investment bank has also maintained a selective stance on sectors, being positive on industries such as financial services, consumer goods, defence, technology, media, telecommunications, and oil marketing firms, while keeping an "Underweight" rating on pharmaceuticals, information technology, industrials, and chemicals.

The upgraded outlook from Goldman Sachs is expected to boost investor confidence and may attract significant foreign capital back to the Indian market, driving upward pressure on stock prices and indices like the Nifty 50.