Goldman Sachs expects further upside in equity markets, including India, said the firm's Emerging Market Equity Strategist Sunil Koul. "We do expect markets to go higher. We have a 27,000 target for Nifty on a 12-month basis," he said while speaking to CNBC-TV18.
Koul noted that whether the 27,000-level for Nifty 50 comes in a shorter period of time, say by Diwali 2025 or year-end, will have to be seen.
"US economy is slowing but avoiding any recession. Fed is cutting rates, and we think they will do two more this year and another two next year. This means that many of the emerging markets' central banks will have room to ease policy. The dollar is continuing to weaken. So the backdrop is pro risk. That is why we think investors will continue to take allocations in the EM equity markets. India will also benefit," he further told the business channel.
'Consumption is the bright spot, other sectors might take more time'
Koul however highlighted the uneven growth in Indian sectors. "India doesn't play into the AI story. The consumption is coming up, but we haven’t seen much pick up in the credit growth. IT is doing well today, but it is very dependent on the US, whose growth is still slow. Consumption is the bright spot, but the other sectors might take a little more time. Hence, out upside estimates for the other sectors are a bit more moderate," he said.
Goldman Sachs maintains its full year earnings growth estimate at 11 percent, Koul said, while adding that the international brokerage sees some earnings upgrades in the consumption sector as the sentiment is improving after the GST rate cut announcement. However, there have been some earnings downgrades in the broader markets over the last one month, he added.
Koul claimed that India has seen more than 20 percent underperformance this year so far, in comparison to the overall emerging markets. This is the largest underperformance seen by the country on an annual basis in the last 30 years, he added.
'Chinese markets performing better than India'
"China in comparison has done much better. India's valuation premium has definitely come down now. We are still overweight on China, but at the same time the catalyst for India to outperform has to come not only from easing valuations but better growth and earnings," Koul said, while noting that financials have the potential to do well and uplift markets.
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