Goldman Sachs Forecasts Indian Equity Recovery After Record Sell-off

Goldman Sachs reports that foreign selling in Indian equities has likely ended, forecasting a gradual return of capital driven by improving domestic fundamentals. In a strategy report titled "Room To Recover," the firm noted that global investors used India as a funding market during the first half of 2026, selling approximately $30 billion in equities over a 3.5-month period.

Investor behavior shifted in mid-June when overseas investors became modest net buyers, injecting approximately $2 billion primarily into financial stocks. This trend continued into July, with foreign institutional investors contributing Rs 15,157 crore in net buying. The firm attributes this potential rebound to a resilient domestic economic outlook and expected 12% year-on-year profit growth for MSCI India ex-commodities in the second quarter of 2026.

Goldman Sachs predicts the Nifty 50 index will rise to 26,500 by June 2027, a nearly 10 percent increase. This outlook represents a shift from the firm's May assessment, which favored North Asian markets. While geopolitical tensions in West Asia and AI-related concerns may cause short-term volatility, analysts suggest that global funds remain significantly underweight on Indian equities, leaving substantial room for increased allocations toward large-cap and value stocks.