Goldman Sachs Lowers Indian Equities To Neutral, Cuts Nifty50 Target To 27K

The analysts pointed out that the worsening earnings sentiment, rising rate of earnings-per-share cuts, and a muted beginning to the earnings season for the second quarter reflect an impact on profits

This stance from Goldman reflects the rising concerns regarding the sustainability of company earnings as consumer spending weakens and commodity prices go up

Source : ABPLIVE AI

Goldman Sachs Group on Tuesday cut down the guidance for Indian equities from overweight to neutral as a slowdown in the economic growth resulted in a weak outlook for corporate earnings. 

Issuing a note, strategists including Sunil Koul noted, “While we believe the structural positive case for India remains intact, economic growth is cyclically slowing down across many pockets,” reported Bloomberg. 

The analysts pointed out that the worsening earnings sentiment, increasing rate of earnings-per-share cuts, and a muted beginning to the earnings season for the July-September quarter reflect an impact on profits. 

Sharing the guidance, the experts said that high valuations and weak support could restrict the near-term upside for local equities. Notably, one of the key equity benchmark indices, NSE’s Nifty50 slumped more than 5 per cent in October. The index remains on track to record its worst month seen in more than four years.

This stance from Goldman reflects the rising concerns regarding the sustainability of company earnings as consumer spending weakens and commodity prices go up. The company’s strategists noted that a large ‘price correction’ remains less likely due to support from domestic flows, however, over the next three to six months, a ‘time correct’ can be expected in the markets.

Additionally, the experts also reduced their 12-month target for Nifty50 from 27,500 to 27,000. Last year, Goldman elevated Indian stocks to overweight stating earnings growth over two years despite global macro headwinds. However, there is still optimism regarding Indian equities in the market.

The report quoted UBS Global Wealth Management and said that the softening in the country’s growth and earnings appear transitory. Speaking in an interview on Bloomberg TV, Tan Min Lan, Asia-Pacific head, UBS’s Chief Investment Office, suggested investors should keep raising ‘foundational or strategic asset allocation into the market’.