Synopsis
According to a Goldman Sachs report, Indian equity markets appear to be past their most difficult phase, with GDP growth projected to rebound. Despite anticipated market volatility due to global challenges, the outlook for India's economy remains positive with strong private consumption and investments.Key Takeaways
- Goldman Sachs sees recovery in Indian equity markets.
- GDP growth for 2025 projected at 6.4% YoY.
- Market volatility may persist due to global issues.
- High-frequency indicators show strong rural activity.
- Long-term economic outlook remains robust.
New Delhi, March 10 (NationPress) A report from Goldman Sachs indicates that the most challenging times for Indian equity markets may be in the past, particularly in terms of economic growth and earnings potential.
Nevertheless, market volatility is expected to persist due to global challenges, especially with the ongoing reciprocal tariffs imposed by the US, according to the global brokerage's analysis.
India's GDP recorded a growth of 6.4 percent on a year-on-year basis in Q4 of the calendar year 2024, driven primarily by a rise in private consumption that has aided the recovery.
According to the brokerage's economists, the decline in India's GDP has reached its lowest point, and a gradual recovery is anticipated moving forward.
High-frequency indicators from various sectors have shown robust rural activity as of January. The forecast for growth in the upcoming four quarters is expected to range between 6.6 percent and 7 percent, with India's GDP growth for the calendar year 2025 projected at 6.4 percent year-on-year.
The budgeted fiscal consolidation of 40 basis points suggests that the peak negative impact from fiscal tightening is likely over, although the Indian government continues to prioritize fiscal consolidation, as noted by Goldman Sachs.
"We anticipate that earnings will stabilize within a few quarters," they mentioned. However, the firm cautioned that valuations for small and mid-cap stocks still appear to be rather high.
Last week, an HSBC report highlighted that India's long-term prospects remain robust, with a medium-term uptrend in the investment cycle supported by government infrastructure initiatives, a resurgence in private investments, and a recovery in the real estate sector.
This report also predicts a rise in private investments in renewable energy and associated supply chains, localization of advanced technology components, and India's increasing role in global supply chains to facilitate enhanced growth.
For India, GDP growth has improved to 6.2 percent (YoY) in Q3 FY25. The central government's capital expenditure is now projected to grow at just 7 percent (YoY) in FY25 and at 10 percent (YoY) in FY26. The RBI is also moving towards easing policy rates.
"We believe the long-term outlook remains promising," concluded the report.
