**MARKET BRIEF: GOLDMAN SACHS INDIA OUTLOOK 2026** **Upgrade to Overweight** Goldman Sachs has officially upgraded Indian equities to **Overweight** for 2026, forecasting an earnings-led recovery after a challenging 2025. Strategist Timothy Moe projects the Nifty 50 will reach **29,000** by year-end, implying a potential upside of approximately **14%** from late 2025 levels. The firm anticipates MSCI India earnings growth to accelerate to **15%** in 2026, up from an estimated **10%** last year. **Valuations and Market Drivers** While current valuations remain elevated—trading at roughly **22x** forward earnings—Goldman Sachs views them as "expensive but defensible" given India’s long-term growth trajectory. The valuation premium over other Asian markets has compressed, offering a more attractive entry point than previous highs. Returns in 2026 will likely be driven by consistent earnings delivery rather than further expansion of price-to-earnings multiples. **Foreign vs. Domestic Flows** Foreign Portfolio Investors (FPIs) sold over **$19 billion** in Indian equities in 2025, with outflows continuing into early 2026 ($2–3 billion). However, strong domestic participation, particularly through recurring SIP inflows, has provided critical market resilience. Goldman Sachs expects foreign inflows to return later in the year, triggered by evidence of earnings recovery, potential rate cuts, and a supportive Union Budget. **Sector Strategy** The outlook favors domestic cyclicals over export-oriented themes. Key "Overweight" sectors include: * **Financials:** Driven by a recovery in the private credit cycle. * **Consumption:** Focus on rural recovery, autos, and consumer staples. * **Defense & Oil:** Supported by policy stability and local manufacturing pushes. In contrast, the firm remains cautious on the IT services sector due to global AI-related disruptions and prefers broad industrial growth linked to domestic capex.