“We expect consensus estimates to be cut meaningfully over the next 2-3 quarters, in-line with trends in prior oil-supply shocks, with the largest cuts in domestic cyclical pockets,” Goldman Sachs wrote in its note.
Foreign Portfolio Investors (FPIs) have sold a record $42 billion in Indian equities since the September 2024 peak. Goldman Sachs believes that the forthcoming earnings cuts, on top of the ongoing investor concerns regarding the potential adverse impact of AI, will mostly impede their re-entry into the markets.
“Weak foreign flows, coupled with rate hikes domestically, and likely softer risk appetite globally point to a lower fair-value multiple in the near-term,” the Goldman Sachs note stated.Goldman Sachs stated that their commodity analysts have raised their oil and gas price forecasts due to a longer impairment of Strait of Hormuz flows. As a result of India’s greater vulnerability to the energy shock, economists at the firm have already lowered India’s 2026 GDP growth to 5.9%, raised their CPI forecasts by 70 basis points, widened their current account deficit estimates to 2% of GDP, and factored in a weaker rupee, along with 50 basis points of rate hikes in 2026.
The brokerage sees risks tilted to the downside over the next three to six months and that the market may not be pricing in the full extent of the earnings cut.
As a result, Goldman Sachs is overweight on banks, staples, telecom, defence and energy, while it has downgraded domestic cyclicals such as Durables, Autos and NBFCs to “market-weight”, and oil marketing companies to “underweight.”
Risks to the upside include earlier-than-assumed resumption of oil flows, and a clear recovery in India’s earnings cycle.
