Goldman Sachs cuts 12-month Nifty target to 25,500 amid earnings concerns

Goldman Sachs has revised its 12-month target for the Nifty to 25,500, down 5.6% from its previous forecast of 27,000. This adjustment reflects a potential upside of about 12% from the Nifty's current level of 22,460. The brokerage has also set its three-month target for the NSE benchmark at 23,000, with a six-month target of 24,000.

Goldman Sachs noted that earnings sentiment for the BSE 200 index has fallen to a two-year low, with third-quarter results missing consensus expectations by 4 percentage points. The brokerage pointed out that while India's GDP growth has likely bottomed out, the recovery is expected to be gradual. The recently reported Q4CY24 GDP growth showed a recovery to 6.2% YoY, from a seven-quarter low of 5.6% YoY in Q3CY24, driven by improved private consumption, although investment growth remains subdued.

Looking ahead, Goldman Sachs expects GDP growth to hover between 6% and 6.7% YoY over the next four quarters, with a full-year CY25 growth forecast of 6.4%. Despite the challenges, the brokerage noted that the pace of earnings cuts has slowed, with the December quarter showing slightly better-than-expected performance.

Goldman Sachs sees signs of a potential bottoming out for Indian equities, with the Nifty 50 having posted declines for five consecutive months and correcting 14% from its September peak. However, the brokerage remains cautious, maintaining a ‘marketweight’ position on India, having downgraded it from ‘overweight’ in October 2024, citing a cyclical slowdown in both economic growth and corporate profits.

Goldman continues to favor sectors such as information technology, consumer staples, automobiles, telecommunications, internet services, and insurance as it navigates the current market volatility.