Goldman Sachs has said the worst is likely over for the Indian economy. In a recent report the global financial firm has said that India has likely moved past its most challenging period of economic slowdown and earnings decline.
Goldman Sachs anticipates continued market fluctuations in the immediate future, citing substantial domestic investments in small- and mid-cap stocks and global uncertainties, particularly regarding tariffs.
“The worst is likely behind us in terms of economic growth and earnings trajectory, and prices have corrected meaningfully,” it said according to an ANI report.
Goldman Sachs retained its “Market Weight” position on India within emerging markets (EM) in a recent analysis, recommending investors to select shares with reliable earnings visibility and sustainable growth.
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The analysis pointed out that the NIFTY 50 index experienced a 10 per cent decline from its peak in September 2024. This stock market correction was a result of diminished earnings growth, influenced by unfavourable macroeconomic conditions and significant decreases in valuation multiples across sectors, the Goldman report said.
Experts observed that FY26 earnings per share (EPS) projections have decreased by approximately 7 per cent across the market.
The firm identified cyclical factors, rather than fundamental weaknesses, as the cause of the recent economic slowdown. They noted that regulatory measures, including strict credit rules in late 2023, conservative monetary policies, restricted liquidity from foreign exchange outflows, and fiscal constraints, contributed to reduced growth momentum.
“The growth slowdown is cyclical rather than structural, and largely reflects policy tightness — the lagged effects of credit regulation in late 2023, cautious monetary policy and (until recently) tight liquidity amidst FX outflows”
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The analysis indicated that recent policy adjustments, including income tax relief in the Union Budget and Reserve Bank of India (RBI) rate reductions, could support economic recovery.
The firm’s economists forecast India’s real GDP growth to reach 6.4 per cent in the second half of 2025.
Nevertheless, the report highlighted ongoing concerns, particularly regarding potential US tariffs on Indian products, which could affect trade and economic expansion.
Whilst the most severe phase of the slowdown appears to be over, the report advises investors to remain vigilant regarding market volatility and external factors influencing India’s economic prospects.
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