New Delhi: Goldman Sachs expects the Nifty to reach 14,100 by the end of 2021 which implies a 15 percent upside from current levels.
In a report, the marquee financial services house said while valuations remain extended and could see some pressure, “we expect further market gains driven by earnings recovery”.
“We are structural bulls on India but had lowered India to market weight in April amid nationwide shutdown, rising pandemic cases and expectations of a significant contraction in domestic activity in the absence of fiscal space,” it said.
“We think the investment case for India has improved now and upgraded it back to overweight for the following reasons: First, India has been a laggard this year underperforming the region by 11pp in USD terms. As we noted in our recent report, Indian equities are most positively sensitive to the improving prospects of a vaccine, and so we expect a ‘catch up’ laggard rally given the positive newsflow on the vaccine front (which could spur faster than expected recovery),” it added.
More importantly, on the fundamental side, the domestic macro recovery is underway as suggested by pick up in high-frequency activity data points.
“Consequently, our economists expect growth momentum to continue with real GDP growth rebounding strongly to 10 percent and 7.2 percent you over the next two years (vs. expected -9 percent this calendar year),” the report said.
“Furthermore, as the economy recovers from the pandemic-induced contraction, we expect corporate profits to rebound 27 percent next year and a further 21 percent in 2022, after an expected decline of 11 percent you this year,” it added.
“While valuations remain extended and could see some pressure, we expect further market gains driven by earnings recovery and expect NIFTY to reach 14,100 by end 2021 which implies 15 percent upside from current levels. Sectorally, we expect cyclical sectors to perform better as the economic recovery continues to gather pace,” Goldman Sachs said.
