Nifty To Reach 20,500 By End-2023, Says Goldman Sachs


The Nifty is expected to reach 20,500 levels by end of 2023, driven by around 15% earnings growth and modest valuation compression, according to Goldman Sachs.

With domestic demand resilient in India, it continues to expect strong mid-teen corporate profit growth in India, it said in a research note on India’s equity outlook for 2023.

India’s equity market valuations are expensive in absolute terms, relative to its own history and bonds, and at record premium compared to the overall region, the report said.

According to the note, the country will continue to offer a secular and strong growth trend over the medium-term, despite likely moderation in growth in the first half of the year. Conditions are conducive for corporate capex cycle revival, which should boost India’s medium-term growth potential, it said.

However, Indian equities could relatively underperform as 2023 unfolds and global macro backdrop improves—spurred by U.S. Fed pivot and dollar turn—which could lead to better performance from other countries, the report said.

According to it, China and China-related markets could trade firm as its reopening acts as a catalyst, which could impact India’s relative returns.

Goldman Sachs has forecasted India’s GDP growth to slow to 5.9% year-on-year in 2023 from 6.9% in 2022. Growth is expected to moderate in the first half as the reopening boost fades and monetary tightening weighs on domestic demand, but may recover in the second half as global growth recovers, the net export drag declines and the investment cycle picks up, it said.

Goldman Sachs expects MSCI India/Nifty profits to grow 15% in 2023 and 2024.

The 15% CAGR profit growth expected in India, is among the highest in the region and almost twice the 8% regional CAGR forecast, the report said.

“More granularly, we expect ex-financials revenues to grow 6% in 2023 and in 2024 after growing 20% this year, reflecting the normalisation in commodity-related earnings from high base, fading of the reopening boost and slowdown in tech revenues on weak global demand,” it said.

Sectorally, banks, energy and select domestic cyclicals are expected to be major contributors to the overall index earnings over the next year.

“Over the long run, we note that earnings are the main driver for market returns as it can easily be seen by plotting MSCI India equity index vs its underlying index EPS,” the report said.

Stronger economic and earnings growth should bode well for long-term prospects of Indian equity market, it said.


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