LIVE TV
ZEE Business
ZEE BUSINESS
हिंदी में पढ़ें  हिंदी में पढ़ें
Live TV
Live TV
  • Home
  • Budget 2021
  • Personal Finance
    • PPF
    • Mutual Funds
    • Income tax
    • EPFO
    • Income Tax Calculator
    • Personal Loan Calculator
    • Car Loan Calculator
    • Home Loan Calculator
    • SIP calculator
    • SWP Calculator
    • MF Returns Calculator
    • Lumpsum Calculator
  • India
    • Companies
    • Property
    • Startups
    • Uidai
  • Economy
    • Aviation
  • Tech
    • Mobiles
    • Apps
  • Auto
    • Cars
    • Bikes
  • Markets
    • Commodities
    • Currency
  • Jobs
  • Indian Railways
  • World
    • Economy
    • Politics
    • Markets
  • videos
  • photos
  • Authors
  • More ...
    • VIDEOS
    • PHOTOS
Read in App
Business News » India News

Goldman Sachs downgrades Indian stock markets' outlook; 5 villains in the picture

While Nifty 50 is trying to survive near 11,400-mark, Sensex on the other hand has given up its all-time high of 38,000-level and is now near 37,500-mark. 

  • Twitter
  • Facebook
  • Linkedin
  • whatapp
  • View in App
Goldman Sachs downgrades Indian stock markets' outlook; 5 villains in the picture
Representational Image: Photo: Reuters
Written By: ZeeBiz WebTeam
Updated: Tue, Sep 18, 2018
10:22 am
Mumbai, ZeeBiz WebDesk

Dalal Street saw positive movement in today’s trading session, with both Sensex and Nifty 50 opening higher by 0.06% and 0.10% respectively. However, this breather was short lived, as at around 09:57 hours, Sensex was trading at 37,561.81 down by 23.70 points or 0.06%, while Nifty 50 plunged by 9.40 points or 0.08% trading at 11,368.35. The fact is that Sensex and Nifty 50 have been seeing heavy selling pressure in recent weeks. While Nifty 50 is trying to survive near 11,400-mark, Sensex on the other hand has given up its all-time high 38,000-level and is now near 37,500-mark. There was a time when Indian markets were among the best performing indexes in EM, however, tables have turned now and experts have started to see a change in Sensex and Nifty 50 and it is not good news at all. In a big blow, Goldman Sachs has lowered downgraded Indian equities. 

In its research note, Goldman Sachs said, “We have been strategically overweight India since March 2014 as we expected pro-growth government policies and structural reforms to drive a pick-up in economic growth and a recovery in corporate profits. While earnings have improved, Indian equities have almost doubled over the past 5 years and outperformed the region by 60pp in USD terms.”

However, the financial institution also said, “Given elevated valuations and recent strong performance, we believe the risk/reward for Indian equities is less favorable at current levels and we lower our investment view from overweight to marketweight. We expect markets to consolidate heading into the elections and NIFTY to reach our 12000 12m target as political uncertainty wanes and earnings accrue.”

Goldman Sachs explained five key reasons why it downgraded Indian markets. 

Stretched valuations

Indian equities are the most expensive in Asia (19x cap-wgt./ 27x avg. PE) and trading at a record 58% premia to region. At these levels, equities have historically posted negative returns over next 3-6 months.

Macro headwinds

Goldman economists expect a n/t growth moderation due to higher oil prices (in INR), tighter financial conditions and weak recent activity data. They forecast a wider CAD (2.6% of GDP this year vs. 1.9% in FY18) and our commodities team expects oil prices to stay high ($80/bbl in 3m).

Earnings ‘catch up’ priced in

NIFTY has compounded at 14% over the past 5 years while earnings grew at 5%. While profit recovery is underway, this micro ‘catch up’ doesn’t warrant further market upside, in our view. Indian equities are pricing in a 17% 10-yr earnings CAGR (+0.8 s.d., the highest in region).

DII flows have slowed; yield gap unfavorable for equities

Domestic inflows have slowed for four consecutive months. Funds could potentially see lower equity inflows as the yield gap between equities/bonds has fallen to 10-yr lows.

Event risk

A likely increase in govt. spending/fiscal deficit before elections and potential event risk of a less stable govt could weigh on markets near-term.

Following above, Goldman mentioned that, sectorally, we upgrade defensives and exporters. We are OW private banks, tech and metals. Ideas: short-dated NIFTY hedge, rural recovery/housing plays, stable GARP, INR beneficiaries vs. losers. Key downside risk: a less stable government. Key upside risk: upside profit surprises, stronger FII flow. 

Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.

TAGS:
Indian markets outlookGoldman SachsSensexNifty
RELATED NEWS

LATEST NEWS

Covid 19 Phase 2: These government employees to be reimbursed 'medical expenses' for coronavirus vaccination

West Bengal, Assam Assembly elections 2021: After TMC, BJP likely to release candidates lists today

Elijah Wood, Cate Blanchett set to reunite as ''Lord of the Rings'' turns 20

CBSE Class 10, Class 12 date sheet revised—check new time table, instructions here

Aadhaar card-based driving licence service: Check step by step guide to renew your driving licence online without going to RTO

Trinamool candidate list 2021: Over 20 MLAs, ministers dropped from TMC candidacy for upcoming Assembly polls

PPF Calculator: You can double Public Provident Fund income and save income tax outgo - you will need this help

JEE Main 2021 registration last date for March session closes tomorrow! Check exam dates, how to apply, admit cards and all other details

7th Pay Commission latest news today: Big Holi gift for Central government employees! Center issues this notification on 7th CPC leave rule

Call of Duty Mobile vs Garena Free Fire comparison: Here's all you need to know about these battle royale games

  • India News
  • World News
  • Companies News
  • Market News
  • Personal Finance News
  • Technology News
  • Automobile News
  • Small Business News
  • Income Tax Calculator
  • Live TV
  • Videos
  • Photos
  • Author
  • Rss Feed
  • Advertise with us
  • Privacy Policy
  • Legal Disclaimer

Latest Trending Updates

  • EPFO
  • Budget 2020
  • Income Tax Return
  • Auto Expo 2020
  • Home Loan
  • Business News

Trending Topics

  • Income Tax
  • income Tax Calculator
  • 7th Pay Commission
  • Reserve Bank of India
  • GST
  • Latest Business News

Follow us on

zeebiz
zeebiz

Partner Sites

  • Zee News
  • Hindi News
  • Marathi News
  • Bengali News
  • Tamil News
  • Malayalam News
  • Gujarati News
  • Telugu News
  • Kannada News
  • DNA
  • WION
Copyright © Zee Media Corporation Ltd. All rights reserved