Goldman Sachs has projected that India will be among the best performing emerging markets by 2025, given the country’s strong macroeconomic stability supported by improving terms of trade, effective inflation management, and reliable domestic risk capital.
The global investment bank has forecast earnings growth of 18-20 percent annually over the next 4-5 years, driven by an emerging private capex cycle, corporate balance sheet restructuring, and structural increases in discretionary spending.
These factors have reduced India’s emerging market beta to around 0.4, proving its premium multiple, the report said. Its investment earnings estimates remain ahead of consensus, and highlight the declining correlation of Indian equities with global markets.
However, global factors such as policy actions in the US and China, as well as national developments, will continue to influence Indian markets, the report said.
Goldman expects macro stability to be further strengthened by fiscal consolidation, increased private investment, and a positive rate gap for real growth.
They envision strong domestic growth, no recession in the US, modest oil prices, modest rate cuts, and a supportive income environment. Sensex earnings are expected to compound at 17.3 percent annually in FY27, which is 15 percent above consensus.
In terms of portfolio strategy, Goldman favors cyclicals over defensives and SMID caps over large caps, recommending overweight positions in Financials, Consumer Discretionary, Industrials, and Technologies.
Goldman Sachs Research said in a report last month that it expects the Indian economy to be vulnerable to global shocks next year – including tariffs imposed by the new administration of US President-elect Donald Trump. India’s GDP will continue to grow strongly in the long term – but at a slower pace next year as government spending and debt growth slow, according to the forecast. ” Santanu Sengupta, India economist at Goldman Sachs Research, writes in his team’s report. Our economists expect the Indian economy to grow by an average of 6.5 percent between 2025 and 2030, the report said.
Goldman Sachs expects headline inflation in India to reach 4.2 percent year-on-year in calendar year 2025, and food inflation at 4.6 percent – much lower than our analysts’ estimate of 7-plus percent in 2024, due to sufficient rain, and good sowing of summer crops. risk in this forecast. So far, high and volatile food inflation, mainly driven by vegetable prices due to climate shocks, has kept the RBI from easing monetary policy,” the report added.
