Goldman Sachs has turned more constructive on India's macroeconomic outlook, citing easing commodity prices, a stabilising rupee, resilient domestic demand and expectations of healthy corporate earnings.
However, the brokerage said economic growth is still likely to remain below levels projected before the West Asia conflict.
The brokerage has revised its 2026 real GDP growth forecast to 6.8 percent, up from the 5.9 percent estimated immediately after the US-Iran conflict, though still below its pre-war forecast of 7.1 percent.
It also expects average inflation to ease to 4.4 percent from the earlier post-war estimate of 4.6 percent, while forecasting Brent crude to average $85 per barrel, down from the earlier assumption of $95.
Brent crude was trading at $78 per barrel on Monday compared with $72 per barrel last week.
“India's improving outlook is being supported by lower commodity prices, a stabilised currency, resilient domestic growth, healthy second-quarter earnings expectations and the possibility of earnings upgrades in select domestic sectors,” it noted.
It cautioned that the broader earnings downgrade cycle has not ended, with consensus earnings growth for MSCI India already cut to 12 percent for 2026 and likely to moderate further towards Goldman Sachs' 10 percent estimate.
More to come
The brokerage expects foreign investor sentiment to improve after record outflows earlier this year, noting that overseas investors remain significantly underweight on Indian equities.
It believes improving domestic fundamentals could encourage foreign flows to return in the second half of the year.
Despite warning that renewed geopolitical tensions in West Asia could trigger near-term volatility, Goldman Sachs expects the Nifty to recover towards its June 2027 target of 26,500.