Summary of this article
Goldman Sachs has downgraded India's equity outlook to 'market weight'
Economists at firm also lowered GDP forecasts and raised CPI inflation outlook for 2026
Brokerage firm Goldman Sachs has downgraded its outlook on the Indian equities market to ‘market weight’ from ‘overweight’, flagging concerns about the macroeconomic impact on the economy due to the surge in crude oil prices. It said that a prolonged disruption in energy supply could create significant pressure on the domestic economy.
Crude oil prices have surged more than 40 per cent since the US-Iran war broke out a month ago. With energy supplies heavily restricted through the Strait of Hormuz, which controls nearly 20 per cent of the global oil supply, Indian companies could face a possible squeeze in margins due to high input costs.
Goldman Sachs lowered its Nifty 12-month outlook to 25,900 from 29,300 earlier. This is nearly 13 per cent upside from the index performance on March 27, which was at 22,860. The downgrade indicates India’s heightened vulnerability to energy supply shocks.
“We see risks tilted to the downside in the next 3-6 months as we think the market may not be pricing in the full extent of earnings cuts,” the brokerage said in a note.
This revision in the outlook also reflects dampening investor sentiment in the Indian stock market. Since the war began, foreign portfolio investors (FPIs) have taken out nearly Rs 1.24 lakh crore from across Indian markets. Equity markets alone have seen an outflow of Rs 1.12 lakh crore from FPIs.
Along with weaker foreign inflows, the brokerage also noted that potential interest rate hikes domestically, and overall softer risk appetite among global investors could lower valuations in the near term.
The brokerage remained ‘overweight’ on banks, consumer staples, telecom companies, defence and energy sectors. It downgraded consumer durables, auto, non-banking financial companies (NBFCs) and oil marketing companies (OMCs), which are cyclicals and downstream sectors.
Economists at Goldman Sachs have also lowered their forecast of India’s gross domestic product (GDP) growth in 2026. The GDP growth outlook has been lowered 110 basis points to 5.90 per cent. Meanwhile, the consumer price index (CPI) inflation forecast has been raised by 70 basis points (bps) to 4.60 per cent.
The change in inflation forecast was due to the anticipation that the current account deficit (CAD) of the country will widen to 2 per cent of GDP on account of a falling Indian rupee. The rupee has fallen nearly 3.60 per cent this month and is currently hovering around 94.65 to the dollar.
