Indian stocks, which have been under a lot of selling pressure lately, will now have to deal with more difficulties after Goldman Sachs Group downgraded Indian stocks from “overweight” to “neutral,” citing slowing economic growth that is affecting the outlook for corporate earnings, according to sources. The group had earlier elevated Indian stocks to “overweight” late last year, pointing to two years of earnings growth in the face of global macroeconomic challenges.
However, businesses are now more wary of Indian equities due to the poor earnings they have posted thus far for the September quarter.
“While we believe the structural positive case for India remains intact, economic growth is cyclically slowing down across many pockets,” strategists, including Sunil Koul, wrote in a note on Tuesday.
According to sources, Goldman Sachs stated that a poor start to the September quarter results season, worsening earnings sentiment, and an increasing rate of earnings-per-share reductions all point to an effect on profitability.
The analysts voiced their worries over exorbitant prices and pointed out that a less encouraging environment would restrict the short-term growth potential of local stocks.
The cautious approach highlights mounting worries about how long corporate profits can last in the face of declining consumer spending and rising commodity prices. The benchmark NSE Nifty 50 Index fell more than 5% in October, setting the historic stock rise in India on course for its worst month in more than four years, indicating that the rally is already beginning to wear off, the article continued.
Additionally, Goldman Sachs analysts reduced their 12-month objective for the Nifty 50 Index from 27,500 to 27,000, suggesting a 10% increase from Tuesday’s closing.
The Asia quant strategists at Bernstein Societe Generale Group downgraded Indian stocks earlier in October as well, pointing to high valuations and forecasting more growth for Chinese stocks due to a possible policy boost. Concerned about ongoing foreign outflows and poor earnings expectations, the analysts changed their rating for India from “neutral” to “underweight.”
This downgrade from Bernstein is consistent with Goldman Sachs’ previous position, indicating that international analysts are becoming more cautious about Indian stocks in light of slowing corporate earnings growth and the economy.
Nifty 50 falls over 5% in October
Major indices have fallen as a result of the severe sell-off in Indian stocks brought on by strong selling pressure from foreign portfolio investors (FPIs). The top 50 blue-chip corporations in the nation’s diverse sectors, represented by the Nifty 50, have fallen 5.19% so far in October, the largest monthly decline since March 2020.
As a result of this sell-off, 32 equities in the index have dropped 10% to 30% from their most recent one-year highs.
