OPEN APP
Home / News / India /  Goldman Sachs upgrades Indian equities to overweight; sees 11% upside to Nifty

Goldman Sachs upgrades Indian equities to overweight; sees 11% upside to Nifty

Goldman Sachs has upgraded Nifty to 14,100 by 2021 end, indicating an 11% upside from current levels. (REUTERS)Premium
Goldman Sachs has upgraded Nifty to 14,100 by 2021 end, indicating an 11% upside from current levels. (REUTERS)

  • Goldman Sachs thinks that the investment case for India has improved after initially lowering India to marketweight in April on concerns of nationwide shutdown
  • The broker expects corporate profits to rebound 27% next year and a further 21% in 2022

MUMBAI: Goldman Sachs has raised Indian equities to overweight on hopes that earnings recovery will lead rally. Goldman Sachs were structural bulls on India but had lowered India to marketweight in April on concerns of nationwide shutdown, rising pandemic cases and expectations of a significant contraction in domestic activity in the absence of fiscal space.

However, the global brokerage house thinks that the investment case for India has improved now and hence has upgraded Nifty to 14,100 by 2021 end, indicating an 11% upside from current levels. Indian benchmark indices have rallied over 60% from the lows hit in March, while making new record highs this week.

“First, India has been a laggard this year underperforming the region by 11 percentage points in US dollar terms. Indian equities are most positively sensitive to the improving prospects of a vaccine, and so we expect a ‘catch up’ laggard rally given the positive newsflow on the vaccine front (which could spur faster than expected recovery)," it said in a note on 11 November.

As the economy recovers from the pandemic-induced contraction, Goldman Sachs expects corporate profits to rebound 27% next year and a further 21% in 2022, after an expected decline of 11% year-on-year this year. “While valuations remain extended and could see some pressure, we expect further market gains driven by earnings recovery," it said.

Sectorally, it expects cyclical sectors to perform better as economic recovery continues to gather pace.

As domestic macro recovery is picking up, Goldman Sachs economists expect growth momentum to continue with real gross domestic product (GDP) growth rebounding strongly to 10% and 7.2% year-on-year over the next two years.

Overall, Goldman Sachs expects 18% total US dollar returns for Asia Pacific regional equities in 2021 as the global economy recovers from the pandemic shock and regional profits rebound from suppressed levels. It said that an upturn in growth and a lag in policy tightening create a sweet spot for equities, especially with light investor positioning.

Besides India, Goldman Sachs is overweight on China and Korea.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Close
Recommended For You
×
Edit Profile
Get alerts on WhatsApp
Set Preferences My ReadsFeedbackRedeem a Gift CardLogout