Goldman Sachs Downgrades Indian Equities, Cuts Nifty 50 Target

Key Findings:

• Goldman Sachs has downgraded its rating on Indian equities to 'marketweight' from 'overweight', citing worsening macroeconomic conditions and slowing earnings growth.
• The global brokerage firm has slashed its 12-month target for Nifty 50 to 25,900 from 29,300 previously, based on earnings growth of 8% in CY26 and 13% in CY27, and a target PE of 19.5x.

Rationale:

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• The US-Iran war has led to a sustained rise in energy prices, which is expected to force consensus profit estimates lower over the next few quarters.
• Higher-for-longer oil prices have meaningfully worsened India's macro outlook, with Goldman Sachs economists lowering India's GDP growth estimates for 2026 by 1.1 pp to 5.9%, and raising CPI forecast by 70 bps.
• The brokerage firm expects a widened current account deficit of 2% of GDP, a weakened rupee, and 50 bps repo rate hikes by the Reserve Bank of India (RBI) in 2026.

Earnings Downgrades:

• Goldman Sachs expects earnings downgrades to begin in a couple of weeks, as we head into the March-end reporting season.
• The brokerage firm expects MSCI India earnings growth of 8% in CY26 and 13% in CY27, about 11 pp below consensus cumulatively over the next 2 years, mainly on account of higher oil prices, slower GDP growth, and a weaker rupee.

Sector Allocation:

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• Goldman Sachs prefers defensive consumption and upstream energy over domestic cyclicals and downstream energy.
• The brokerage firm upgrades upstream energy (refiners and E&P) to overweight on tight refining capacity and higher-for-longer oil prices, while downgrading downstream oil marketing companies (OMCs) from overweight to underweight.
• It also downgrades autos and durables from overweight to marketweight given demand sensitivity to higher inflation and interest rates, and margins vulnerability to higher input and logistics costs.