India's equity market could recover in the second half of 2026 as lower commodity prices, a stable currency and resilient domestic growth improve the outlook, according to Goldman Sachs. The brokerage retained its June 2027 target of 26,500 for the NSE Nifty 50, implying about 10% upside from current levels, and said foreign investor positioning leaves room for capital to return to Indian equities.
Goldman Sachs' note came even as the NSE Nifty 50 has fallen 7.8% from its record high. Except in April and June, the benchmark index has declined in every month this year. The Nifty is down 7.4% so far in 2026, making it the worst-performing benchmark index among its Asian and global peers.
Previously, the benchmark had entered a correction phase in March after higher transaction taxes, geopolitical tensions and currency weakness weighed on investor sentiment.
The brokerage said India's outlook has improved in recent weeks as commodity prices eased, the rupee stabilised, domestic growth remained resilient and earnings expectations for the June quarter stayed healthy. It also pointed to the potential for a recovery in select domestic sectors.
"With ultra-light foreign positioning, we see ample room for flows to return," Goldman Sachs said in its note. "With renewed geopolitical tensions in the Middle East now fully priced near-term volatility, we see room for Nifty to recover towards our June 2027 target of 26,500, implying c.10% upside from current levels."
Goldman Sachs said investors looking to increase exposure to Indian equities should focus on the macro themes likely to drive markets in the second half of the year.
Rotation Towards Value
The brokerage expects investors to rotate from growth stocks to value stocks as expectations of an economic recovery improve after the first-half correction.
"As foreign outflows reverse course through 2H, most sold and reasonably valued pockets like large-caps and banks stand to gain the most," the note said.
Goldman Sachs identified second-quarter earnings, foreign inflows and the potential impact of a "super" El Nino as the key themes to monitor over the coming months.
The brokerage said June-quarter earnings could create tactical opportunities if the impact of the recent oil price shock differs from market expectations. It added that analysts may have cut earnings estimates too sharply for energy refiners, where tight capacity could support margins, and for tourism and airline companies, where demand has remained resilient while oil prices have moderated.
It also expects strong domestic bond inflows and a steady rupee to support domestically focused sectors over exporters in the second half. A potential "super" El Nino, however, could present mixed outcomes, acting as a headwind for the broader market while supporting power utilities if supply shortages emerge.
Goldman Sachs recommended overweight positions in utilities, banks, energy refiners, technology, media and telecommunications, and defence. It also preferred large-cap stocks over mid-caps, value over growth, and domestic sectors over exporters, while remaining underweight on exporters, downstream oil companies and select materials stocks.
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