Goldman Sachs sees India among top emerging markets in 2025

Goldman Sachs has projected India to be among the best-performing emerging markets in 2025, given the country’s robust macroeconomic stability backed by improving terms of trade, effective inflation targeting, and reliable domestic risk capital.

The global investment bank has forecast an earnings growth of 18-20 per cent annually over the next 4-5 years, driven by an emerging private capex cycle, corporate balance sheet re-leveraging, and a structural rise in discretionary consumption.

These factors have reduced India’s beta to emerging markets to approximately 0.4, justifying its premium valuation multiples, the report stated.

Its investment earnings estimates remain ahead of consensus, and they highlight a declining correlation of Indian equities with global markets. However, global factors such as policy actions in the US and China, as well as geopolitical developments, will continue to influence Indian markets, the report added.

Goldman expects macro stability to be further strengthened through fiscal consolidation, increased private investment, and a positive real growth-real rates gap. They assume robust domestic growth, no US recession, benign oil prices, modest rate cuts, and a supportive liquidity environment. Sensex earnings are projected to compound at 17.3 per cent annually through FY27, which is 15 per cent above consensus.

In terms of portfolio strategy, Goldman favours cyclicals over defensives and SMID caps over large caps, recommending overweight positions in Financials, Consumer Discretionary, Industrials, and Technology.

Goldman Sachs Research stated in a report last month that it expects the Indian economy to be relatively insulated against global shocks over the coming year — including tariffs levied by the new administration of US President-elect Donald Trump. India’s GDP will keep growing strongly in the long term — but with a speed bump next year as government spending and credit growth slow, according the forecast.

“The structural long-term growth story for India remains intact driven by favourable demographics and stable governance,” Santanu Sengupta, chief India economist at Goldman Sachs Research, writes in his team’s report.

Our economists expect India’s economy to grow at an average of 6.5 per cent between 2025 and 2030, the report said.

Goldman Sachs expects headline inflation in India to average 4.2 per cent year-on-year in the 2025 calendar year, with food inflation at 4.6 per cent — much lower than our analysts’ estimate of 7 per cent-plus for 2024, thanks to adequate rainfall, and good sowing of the summer crop.

“Food supply shocks due to weather-related disruptions remain the key risk to this forecast. Thus far, elevated and volatile food inflation, mainly driven by vegetable prices due to weather shocks, has kept the RBI from easing monetary policy,” the report added.

(With inputs from IANS)