Goldman Sachs Predicts Flat Indian Stock Market Amid High Valuations and Weak Earnings

Goldman Sachs anticipates that Indian equities will remain rangebound over the next three months, following a recent decline into correction territory—the worst earnings season in four years and persistently high valuations. The Wall Street brokerage, maintaining a tactical “marketweight” stance on Indian equities, projects the benchmark Nifty 50 to reach 24,000 points within the next three months, indicating a gain of just under 3% from current levels.

This outlook contrasts with last month’s prediction, where Goldman Sachs expected the Nifty to decrease by about 1% to approximately 24,500 over the same period. Since that forecast, both the Nifty and the BSE Sensex have entered correction territory, each falling more than 10% from their all-time highs on September 27, primarily due to record foreign outflows and disappointing corporate earnings.

In a note published late Tuesday, Goldman analysts stated, “We expect the market to remain rangebound over the next 3 months and for a back-loaded recovery as growth picks up.” They foresee the Nifty reaching 27,000 points in 12 months, implying a nearly 16% increase from current levels and surpassing its record high of 26, … .

However, Goldman cautions that Indian equities may face further de-rating risks, as valuations, despite the recent decline, still exceed a ‘fair-value’ estimate … ). The note highlights, “Valuations have de-rated … .” The MSCI India index has also entered correction territory, down more than 10% …

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Goldman expects Indian companies to achieve 13%-16% earnings … aligns with their long-term Nifty target. For the July-September quarter … approximately half of the 50 firms … surpassed analysts’ estimates—the lowest proportion since March 2020, when only 20% of companies exceeded expectations at the onset of the COVID-19 pandemic … according to data compiled by LSEG.