New Delhi: Goldman Sachs expects India to be one of the best-performing emerging markets in 2025 as the country maintains strong macroeconomic stability, supported by improving terms of trade, effective inflation targeting and reliable domestic risk capital.
The global investment bank forecasts earnings growth of 18-20% annually over the next 4-5 years, driven by an emerging private capital spending cycle, re-leveraging of corporate balance sheets and structural growth in discretionary consumption. These factors have reduced India’s beta for emerging markets to about 0.4, justifying its premium valuation multiple, the report said.
Its investment return forecast remains above consensus and underscores India’s declining correlation with global markets. However, global factors such as policy actions by the United States and China and geopolitical developments will continue to impact the Indian market, the report added.
Goldman Sachs expects macro stability to be further strengthened through fiscal consolidation, increased private investment and a positive gap between real growth and real interest rates. They assume strong domestic growth, no U.S. recession, moderate oil prices, modest interest rate cuts, and a supportive liquidity environment. Sensex earnings are expected to grow at a CAGR of 17.3% through FY27, which is 15% higher than market expectations.
In terms of portfolio strategy, Goldman Sachs favors cyclical stocks over defensive stocks, SMID stocks over large-cap stocks, and recommends overweight financials, consumer discretionary, industrials and technology stocks.
Goldman Sachs Research said in a report last month that it expected India’s economy to be relatively unaffected by global shocks in the coming year, including tariffs imposed by the new administration of U.S. President-elect Trump. Forecasts show that India’s gross domestic product will maintain strong growth in the long term, but will slow next year as government spending and credit growth slow.
“India’s structural long-term growth story is driven by favorable demographics and stable governance,” Santanu Sengupta, chief India economist at Goldman Sachs Research, wrote in his team’s report. Still intact.
According to the report, our economists expect India’s economic growth to average 6.5% between 2025 and 2030.
Goldman Sachs predicts that India’s overall inflation rate will average 4.2% in 2025, with food inflation rate at 4.6%, which is far lower than our analysts’ forecast of more than 7% in 2024, thanks to sufficient financial support. Crops are sown well.
“Food supply shocks from weather-related disruptions remain the key risk to this forecast. So far, rising and volatile food inflation, driven mainly by vegetable prices due to weather shocks, has prevented the Reserve Bank of India from easing monetary policy, “The report added.