Goldman Sachs has raised India to Overweight within the EM and Asian allocation, and the international brokerage house expects the benchmark, Nifty, to reach 29,000 by 2026-end. This implies “14% upside, led largely by underlying 14% trend earnings growth in 2026-2027,” the international brokerage highlighted. What are the top sectors they are focusing on now? Within India, the financial and consumer sectors lead the list of their top bets.
However, that’s not all. They have identified six key sectors tht’s likely to lead the market’s next phase. The brokerage said early signs of foreign portfolio inflows, together with policy easing and improving earnings, mark a shift in sentiment after a year of persistent selling by overseas investors.
Top 6 sectors in Goldman Sachs’ focus list
The brokerage’s latest strategy note positions India as a beneficiary of the demand revival in the domestic market
Goldman Sachs on financials: Credit momentum returns with easing policy
Goldman called financials its strongest overweight, expecting banks and NBFCs to gain from improving credit demand and lower funding costs. The Reserve Bank’s recent 100-basis-point reduction in policy rates, along with liquidity measures and CRR relaxation, is beginning to transmit into lending.
Credit growth is holding around 14 per cent year-on-year, and asset quality remains stable. “The sector has been heavily under-owned by global investors after a year of muted returns,” Goldman said. “With policy now supportive and asset stress contained, the setup is turning favourable.”
Private banks are likely to lead on profitability, though public-sector lenders are also expected to post steady double-digit growth.
Goldman Sachs on autos: Revival in sales and lower finance costs
The automobile sector is showing early signs of a cyclical upturn. Goldman expects demand to strengthen as interest rates ease and rural incomes stabilise. Festival-season retail sales were the highest in two years, and two-wheeler volumes have started to recover.
Commodity input costs have moderated, giving automakers room to rebuild margins. “The auto sector is emerging as a clear domestic recovery play,” the brokerage said. “Volumes are rebounding at a time when financing is getting cheaper and supply bottlenecks are behind us.”
The report favours large diversified manufacturers and component suppliers with exposure to passenger and electric vehicles.
Goldman Sachs on staples: Rural demand and margin recovery
After several weak quarters, consumer staples are showing volume recovery as food inflation cools and input costs ease. Goldman said rural consumption, which had been the missing link in last year’s demand mix, is beginning to stabilise.
“Companies with wide distribution and pricing flexibility are positioned to deliver steady earnings growth,” the note said. “Easing input inflation and better monsoon conditions are supporting sentiment.”
Goldman expects sector profit growth in double digits through FY26–27, noting that current valuations are supported by visibility of cash flows.
Goldman Sachs on durables: Urban consumption cycle improving
Goldman has upgraded consumer durables, citing an uptick in urban discretionary spending and easier credit availability. Demand for appliances, electronics, and home products is expected to rise as financing costs decline and household confidence improves.
“With penetration levels still low and household balance sheets in better shape, durables can post stronger growth than currently priced in,” the report said. Government support for local manufacturing and production-linked incentive schemes also provides additional support to margins and capacity expansion.
Goldman Sachs on defence: Steady order pipeline, strong policy backing
Defence remains a structural overweight. Large order books, visibility of deliveries, and government commitment to indigenisation give the sector stable multi-year earnings.
Private defence manufacturers with strong execution and proprietary capabilities are expected to post profit growth above 20 percent over the next two years. “Even after a sharp run-up, the space retains potential given order visibility and limited global exposure,” Goldman said.
Recent price consolidation, the brokerage added, offers entry opportunities for long-term investors.
Goldman Sachs on Internet and telecom: Profitability improving, platforms stabilising
Goldman said improving operating leverage in digital and telecom companies makes them attractive again after two years of correction.
Telecom operators are benefiting from stable competition and rising data usage, while large internet and fintech firms are delivering clearer paths to profitability. “These companies have corrected meaningfully, and their earnings visibility is now stronger,” the report said.
Foreign investors, it added, are likely to re-engage with the sector as part of a broader return to India’s domestic growth story.
What sectors are Goldman Sachs cautious on?
Goldman Sachs is however, Underweight exporters such as large-cap generic pharma and IT services, downgrading software services amid uncertain growth visibility and potential headwinds from higher H-1B costs and US trade tensions. Industrials, chemicals, and parts of infrastructure are also underweight, with capex recovery seen as nascent and ordering activity still tepid.
FIIs show first signs of coming back
Foreign flows are the core of the current market debate. Goldman’s data show that India’s valuation premium to Asia ex-Japan has narrowed to near long-term averages, removing a key obstacle for global funds.
The brokerage said that softening US yields, stable oil prices, and India’s improving growth outlook have started to attract foreign buying after months of liquidation. “India has underperformed emerging peers despite stronger fundamentals,” it said. “With global risk appetite improving and policy turning accommodative, inflows should resume gradually.”
Goldman Sachs on India: Upgrade backed by policy easing and early earnings stability
Goldman Sachs has upgraded India to Overweight after a year of steep underperformance that saw MSCI India trail MSCI EM by nearly 25 percentage points. Foreign investors sold around $16 billion (Rs 1.33 lakh crore) in 2025, pushing ownership to multi-year lows. Recent data, however, show early signs of inflows returning as earnings stabilise.
Goldman Sachs on India: Risks to watch
That said, Goldman listed several downside risks, including weaker global demand that slows exports, renewed inflation pressures that limit further easing, and heavy equity supply that tests domestic liquidity.
It also flagged the possibility that global funds remain cautious longer than expected, delaying the FII inflow rebound. “Sentiment remains fragile, and foreign allocations are still far from previous peaks,” the report said.
