Goldman Sachs Upgrades India to ‘Overweight,’ Citing Earnings Revival and Policy Support

Global investment bank Goldman Sachs has upgraded India’s equity market outlook to “overweight” from “neutral,” reversing its October 2024 downgrade.

The firm cited a sharp improvement in corporate earnings momentum and a raft of policy tailwinds that it said are set to bolster growth through 2026.

The brokerage has set a year-end 2026 target of 29,000 for the benchmark Nifty 50 index, implying a 14 percent upside from Friday’s close. The Nifty 50 has gained about 8.5 percent year-to-date, lagging several other emerging markets during what has been one of their strongest years in recent history.

Goldman’s analysts, led by Sunil Koul, said the “year-long earnings downgrade cycle” for Indian companies has now bottomed out, signaling the start of a recovery phase. In a note released after Indian market hours on Friday, the firm said India’s economic and policy environment has turned decisively supportive for corporate profitability.

Policy Tailwinds and Earnings Recovery

Goldman cited a mix of growth-supportive policies — including recent rate cuts by the Reserve Bank of India, liquidity easing, bank deregulation, reductions in the Goods and Services Tax (GST), and a slower pace of fiscal consolidation — as key enablers of economic expansion. These measures, the bank said, have begun to translate into stronger corporate performance across major sectors.

The firm noted that September-quarter results were largely better than expected, prompting analysts to revise earnings estimates upward in several industries. The recovery, Goldman said, is likely to be led by financials, consumer goods, automobiles, defense, oil marketing companies, and technology-driven telecom and internet businesses.

However, the report maintained a cautious stance on export-oriented sectors such as information technology, pharmaceuticals, industrials, and chemicals, where global demand uncertainty and slowing public capital expenditure could weigh on earnings.

Domestic Strength Offsets Foreign Outflows

Despite substantial foreign portfolio outflows — around $30 billion since the Nifty’s 2024 peak and another $17.4 billion so far in 2025 — Goldman believes domestic liquidity will continue to support the market. The firm pointed to record $70 billion in equity purchases by domestic institutions in 2025, buoyed by steady inflows from retail investors and systematic investment plans (SIPs).

The report also highlighted a structural shift in India’s investor base, where local participation has increasingly cushioned markets from the volatility of foreign fund flows. Goldman said that with India’s valuation premium to other emerging markets now significantly lower than in late 2024, the country’s relative expensiveness has become “defensible,” particularly given its superior earnings visibility and macro stability.

Amid rising global geopolitical and trade tensions, Goldman expects domestic resilience to remain India’s defining strength. It emphasized investment themes centered on self-sufficiency, a revival in mass consumption, and expansion of new-economy sectors such as digital infrastructure, clean energy, and defense manufacturing.

These areas are expected to offer high-growth opportunities at fair valuations, underpinned by strong domestic demand and supportive government initiatives.

Goldman’s move follows a similar upgrade by HSBC in late September, which also cited improving corporate earnings, robust policy momentum, and India’s growing insulation from global financial shocks as reasons for optimism.

Analysts say the back-to-back endorsements from major global banks mark a turning point in investor sentiment toward India, suggesting that the world’s fifth-largest economy could re-emerge as a top performer among emerging markets in 2026.