India’s record stock rally is already showing signs of fatigue.

Goldman Sachs Group Inc tactically lowered Indian equities to neutral from overweight as slowing economic growth dents the outlook for corporate earnings.
“While we believe the structural positive case for India remains intact, economic growth is cyclically slowing down across many pockets,” strategists including Sunil Koul wrote in a note on Tuesday. Worsening earnings sentiment, an accelerating pace of earnings-per-share cuts and a weak start to the September-quarter results season indicate an impact on profits, they added.
High valuations and a less supportive backdrop could limit the near-term upside for local shares, they said.
The cautious stance underscores growing concerns over the sustainability of company earnings amid weakening consumer spending and increasing commodity prices. India’s record stock rally is already showing signs of fatigue, with the benchmark NSE Nifty 50 Index sliding more than 5% in October, on track for its worst month in more than four years.
“A large ‘price correction’ is less likely given support from domestic flows, but markets could ‘time correct’ over the next three to six months,” Goldman Sachs strategists said. They lowered the 12-month target for the NSE Nifty 50 Index to 27,000 from 27,500 previously, implying a 10% upside from Tuesday’s close.
The Nifty gauge currently trades at 20 times its 12-month forward earnings, above its five-year average of 19.4 times. Foreign funds have sold $7.8 billion of Indian equities on a net basis this month through Monday, poised for the biggest withdrawal since March 2020, according to data compiled by Bloomberg.
Goldman had raised Indian stocks to overweight late last year, citing earnings growth over two years despite global macro headwinds.