Goldman Sachs sees 10% upside in Nifty by June 2027, bets on banks and large-caps

Goldman Sachs expects Indian equities to recover over the next 12 months after a difficult first half of 2026, driven by easing oil prices, a more stable rupee, resilient domestic growth and the return of foreign investors, even as near-term risks from Middle East tensions continue to weigh on markets.

The global investment bank has set a June 2027 target of 26,500 for the Nifty 50, implying nearly 10% upside from current levels. However, it said the recovery is unlikely to be broad-based, with gains expected to be led by large-cap stocks, banks, utilities and companies focused on domestic demand.

Indian markets remained under pressure on Monday as renewed geopolitical tensions in West Asia pushed crude oil prices higher. Around 12.30 pm, the Sensex was down about 605 points, or 0.8%, at 76,966, while the Nifty 50 fell 172 points, or 0.7%, to 24,034.

In a report authored by strategists Amorita Goel, Sunil Koul and Timothy Moe, Goldman said India's macroeconomic outlook has improved in recent weeks as commodity prices softened, the rupee stabilised and domestic economic activity remained resilient.

Foreign investor sentiment is turning positive

The bank also believes foreign investor sentiment is beginning to turn after a record phase of selling. Overseas investors withdrew nearly $30 billion from Indian equities over three-and-a-half months during the first half of the year, contributing to the Nifty's 9% decline and making Indian equities the worst-performing market in the region on a relative basis in nearly three decades. However, foreign funds turned modest net buyers from mid-June, bringing back around $2 billion, primarily into financial stocks.

Goldman said foreign ownership of Indian large-cap stocks has fallen to a decade low, leaving significant room for global investors to rebuild positions. It expects the return of foreign flows to favour large, liquid companies, which bore the brunt of earlier selling. Large-cap valuations have now corrected close to their long-term averages, while mid-cap stocks continue to trade at elevated premiums.

The brokerage also expects investors to rotate towards value stocks after growth shares outperformed during the slowdown. Banks remain its preferred sector, supported by attractive valuations, healthy credit growth, improving liquidity following Reserve Bank of India measures and expectations of nearly $60 billion in bond-market inflows next year.

Domestic sectors could outperform

While Goldman expects corporate earnings estimates to face further downgrades in the coming months because of the lagged impact of higher oil prices and currency weakness, it believes domestic sectors such as financials, utilities and tourism could outperform.

It has upgraded utilities to "overweight", citing expectations of stronger electricity demand amid forecasts of a hotter and drier monsoon linked to El Niño. The bank also remains positive on defence, telecommunications, refiners and oil and gas exploration companies, while staying underweight information technology, pharmaceuticals, metals and mining, and oil marketing companies.

Goldman has raised its 2026 GDP growth forecast for India to 6.8% from 5.9% projected during the peak of the US-Iran conflict, while lowering its inflation estimate to 4.4%. It expects Brent crude to average $85 a barrel and the rupee to remain broadly stable around 96 against the US dollar over the next 12 months, providing a more supportive backdrop for Indian equities.