Inside Goldman Sachs' Strong Case For India In 2026; Policy Support, Earnings Key Drivers

Indian equities ended the week under pressure, but Goldman Sachs believes the recent weakness could mark the setup for a stronger 2026, supported by improving earnings momentum, policy tailwinds and stabilising valuations. In its latest India Weekly Kickstart note, Goldman said the Nifty fell about 2% week-on-week, underperforming global equities, even as global markets edged higher.

The brokerage reiterated its overweight stance on India, citing easier financial conditions, possible tax relief, ongoing domestic reforms across labour and regulatory frameworks as key policy tailwinds.

Pharmaceuticals and IT stocks were largely flat, while energy and infrastructure names lagged the broader market, reflecting continued caution after a subdued 2025.

Goldman noted that MSCI India is trading at around 22.4 times forward earnings, roughly 3% above its fair-value estimate and modestly above long-term averages. However, India’s valuation premium to Asia has compressed sharply, a level that has historically coincided with periods of moderate outperformance.

Looking ahead, Goldman expects mid-teen returns of 14%-15% in 2026, underpinned by an earnings recovery and relatively stable valuations. The brokerage reiterated its overweight stance on India, citing easier financial conditions, possible tax relief and ongoing domestic reforms across labour and regulatory frameworks as key policy tailwinds.

As the earnings downcycle stabilises, Goldman expects profit growth to re-accelerate from low double digits in FY24–25 to the mid-teens by FY26-27, helping reverse the underperformance seen last year.

Goldman identified mass consumption revival, financials, defence and energy security as its top thematic ideas for 2026. In the near term, the brokerage expects December-quarter earnings growth to moderate to around 8% year-on-year, down from 13% in the previous quarter.

Telecom, utilities, cement and staples are likely to weigh on profits, while commodities and autos could see slower revenue growth. Financials and IT are expected to broadly track consensus estimates.

Flows remained mixed during the week, with foreign investors selling about $1 billion, taking year-to-date outflows beyond $4 billion. Domestic institutional investors continued to provide support.

Goldman expects foreign selling pressure to ease as earnings delivery improves and catalysts such as the February Union Budget and a potential US-India trade agreement come into focus.