Despite the fresh escalation in the Middle East between the US and Iran, Goldman Sachs believes the outlook for Dalal Street is improving and sees room for the Nifty50 index to climb nearly 10% from current levels.
The global brokerage expects the benchmark index to reach 26,500, implying an upside of around 9.5% from Monday’s closing level of 24,211.
But more importantly for investors, it has identified the sectors and stocks it believes are best placed to benefit if the market recovery gathers pace.
According to the brokerage, several factors are beginning to improve India’s investment outlook.
These include lower commodity prices, a more stable rupee and expectations of healthy corporate earnings in the second quarter of FY27. Together, these could support investor confidence after months of volatility.
Goldman Sachs also believes foreign institutional investors (FIIs), who have remained cautious for much of the year, could return to Indian equities.
“Foreign selling is likely over, and sentiment should turn incrementally favourable on improved domestic outlook and ultra-light foreign positioning,” the brokerage said in a client note.
It added that although renewed tensions in West Asia may create short-term volatility, foreign investor positioning remains extremely light, leaving room for fresh inflows if market conditions improve.
Rather than recommending the broader market, Goldman Sachs has highlighted specific sectors that it believes could outperform.
The brokerage has recommended investors go “long” on:
The brokerage expects investors to gradually shift from high-growth stocks towards reasonably valued companies as confidence in the market recovery improves.
“We expect a rotation from ‘Growth’ to ‘Value’ as investors look for reasonably valued pockets in anticipation of a recovery,” Goldman Sachs said.
Goldman Sachs has identified 15 large-cap stocks that it believes are well placed to benefit from its positive India view.
The list includes:
Goldman Sachs’ latest view suggests it is becoming more constructive on India after a period of caution.
The brokerage believes improving domestic conditions, stable macroeconomic indicators and the possibility of foreign money returning to Indian equities could support the next leg of the market rally.
At the same time, it has cautioned that geopolitical tensions in West Asia remain a key risk that could keep markets volatile in the near term.
For investors, the message is that while the broader market may still see short-term swings, Goldman Sachs believes quality large-cap companies, particularly in banking, tourism and energy refining, could be among the biggest beneficiaries if the recovery continues.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)