The drivers behind Goldman’s change of heart include India ‘s underperformance this year among regional peers by 11pp in USD terms.
Morgan Stanley said that small and midcap stocks are likely to be in focus in 2021.
Global investment bank Goldman Sachs has once again turned bullish on Indian share markets, raising its 2021 target on NSE Nifty 50 to 14,100 points, and raising India back to ‘overweight’. The reversal comes with Goldman Sachs saying that earnings are likely to continue improving for the next two years after the sharp fall this year and a global recovery from the pandemic that jolted equity markets earlier this year. Earlier in April Goldman Sachs cut India to ‘marketweight’ claiming that the worst might not be over for Indian equity markets.
The Nifty 50 has managed to chart its way to make fresh all-time highs repeatedly over the last few days. Goldman Sachs’ new target would see Nifty go another 10% from its current record high of 12,769 points. “We think the investment case for India has improved now, and upgrade it back to overweight,” Goldman Sachs said in a note.
The drivers behind Goldman’s change of heart include India ‘s underperformance this year among regional peers by 11pp in USD terms. “As we noted in our recent report, Indian equities are most positively sensitive to the improving prospects of a vaccine, and so we expect a ‘catch up’ laggard rally given the positive newsflow on the vaccine front which could spur faster than expected recovery,” the note said.
Economic recovery, growth momentum
India’s recovery on the macroeconomic front has also been duly noted by the global brokerage house. With the unlocking of the economy India has been seeing a pick-up in high frequency data. “Consequently, our economists expect growth momentum to continue with real GDP growth rebounding strongly to 10% and 7.2% yoy over the next two years,” they added. With an economic recovery, corporate earnings are expected to rebound sharply after a 11% drop, that is expected this year. Goldman Sachs sees corporate profits rebound 27% in 2021 and another 21% in 2022.
Which sectors will perform better
With Nifty expected to map its way towards the 14,100 target given by Goldman Sachs, the global brokerage house believes that cyclical sectors will perform better as economic recovery continues to gather pace. “We retain our core overweights in internet and media, consumer retail and services and tech hardware sectors,” the report said. With an upturn in growth and a lag in policy tightening, Goldman Sachs said that a sweet spot for equities, especially with light investor positioning has been created.