Goldman Sachs expects the Indian stock markets to remain volatile in the near-term even as the overall valuations have come off meaningfully from their peak levels seen in September 2024. As a strategy, they remain ‘Marketweight’ on India within the emerging markets (EM) context, and recommend focusing on quality growth and earnings visibility.
“While our strategy team also believes that the worst is likely behind us in terms of economic growth and earnings trajectory, and prices have corrected meaningfully, they see higher market volatility in the near term given still elevated domestic positioning in small/mid-caps and ongoing global uncertainty from tariffs,” wrote analysts at Goldman Sachs in a recent report.
Amidst this backdrop, Goldman Sachs has highlighted ten stocks that offer 23 per cent upside (on average) over the next 12 months and includes HDFC Bank, AU Small Finance, Mahindra & Mahindra (M&M), MMYT, Indigo, Adani Ports & SEZ, Power Grid, Apollo Hospitals, Titan and GCPL.
“These names have strong tailwinds within their respective sectors and have the potential to deliver strong returns over the next 12 months due to either positive catalysts or healthy EPS growth momentum. As per our estimates, these companies are expected to deliver average earnings growth of 25 per cent and return on equity (ROE) of 24 per cent on average over 25-27E,” the note said.
Goldman Sachs top India bets for FY26
The Nifty 50 has corrected 10 per cent from its peak in September 2024, Goldman Sachs said, driven by cuts in earnings per share (EPS) growth following a slower macro as well as a sharp correction in the valuation multiples across sectors. Across the market, FY26 EPS expectations, the note said, have been cut by an average of 7 per cent.
Growth slowdown
On the economic front, Goldman Sachs believes that the growth slowdown is cyclical rather than structural, and largely reflects policy tightness — the lagged effects of credit regulation in late 2023, cautious monetary policy and (until recently) tight liquidity amidst FX outflows, and most importantly fiscal tightening.
“Some recent policy easing measures (income tax relief in the union budget and policy rate cuts by the RBI) may help revive real GDP growth later in the year, with our economists expecting 6.4% growth in the second half of calendar year 2025 (H2-CY25). The risks to these estimates are largely related to the impact of potential reciprocal US tariffs on India,” analysts at Goldman Sachs said.
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