Goldman Sachs has lowered its 12-month target for the Nifty to 25,900 from 29,300, citing a worsening macro backdrop driven by persistently high energy prices. The revised target implies a ~13% potential upside, based on moderated earnings growth assumptions and a target price-to-earnings multiple of 19.5x. The brokerage has also downgraded Indian equities to “market-weight” from overweight, reflecting a more cautious stance as global and domestic risks begin to weigh on the outlook.
According to Goldman Sachs' India strategy team led by Amorita Goel, higher-for-longer energy prices are expected to weaken India's macroeconomic mix.
The brokerage has cut GDP growth forecasts, while raising inflation projections and widening estimates for the current account deficit. The disruption to oil supply chains — particularly via the Strait of Hormuz — is seen as a key risk, given India's dependence on imported crude.
Earnings Outlook Trimmed Sharply
Goldman Sachs has reduced its earnings growth forecast by 9 percentage points cumulatively over the next two years, signalling a meaningful downgrade to corporate profitability expectations.
It expects consensus earnings estimates to be revised downward over the next 2–3 quarters, echoing patterns seen during previous oil shocks. Sectors sensitive to domestic demand and input costs are likely to bear the brunt of these downgrades.
The brokerage also flagged softer investor sentiment in the near term, pointing to continued foreign outflows and pressure on equity valuations. Persistent selling by global investors, coupled with rising interest rates and global risk aversion, could cap near-term upside for Indian equities. Goldman Sachs expects markets to remain volatile as earnings downgrades play out.
Defensive Sectors Preferred
In this environment, Goldman Sachs is tilting its portfolio towards defensive and resilient sectors. It remains overweight on banks, consumer staples, telecom, defence and energy, where earnings visibility is relatively stronger. On the other hand, it has downgraded cyclical and consumption-linked sectors, including autos, consumer durables, NBFCs and oil marketing companies, which are more vulnerable to economic slowdowns and cost pressures.
While risks remain tilted to the downside in the near term, the brokerage notes that a recovery in oil supply or easing geopolitical tensions could act as potential triggers for a more constructive outlook.
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