Global investment bank and financial services firm Goldman Sachs believe that the Indian market is trading at high valuations, hence has downgraded Indian equities.
Indian Stock Market: Talking about this year, the Indian stock market has gained about 31 percent in 2021. The domestic market has been the best performing Asian market this year. But now the valuation of the market is visible more. Global investment bank and financial services firm Goldman Sachs also believe that the Indian stock market is trading at high valuations, hence the financial services company has downgraded Indian equity. Goldman Sachs believes that consolidation can be seen in the Indian market for the next 3 to 6 months.
Why has this year been fast?
Goldman Sachs says that so far this year there has been a great rally in the Indian market. The market has been supported by the ultra-easy monetary policy, speed of vaccination and reopening of the economy. Indian equity market has outperformed in Asian markets. The market has gained 44 per cent since Goldman Sachs upgraded Indian equities in November last year.
Risk Reward Ratio Not Favourable
Goldman Sachs says that at the current level, the risk reward ratio of Indian equities is not favourable. While we expect a strong cyclical and profit recovery next year and remain constructive for the mid-term despite increasing digitization in the index, it appears that the recovery at peak valuations currently is well priced. From here, further profit recovery can be seen. Goldman Sachs says the Indian equity market is trading at close to 23 times the 12-month forward PE valuation, at a record 60 per cent premium to the Asia Pacific East-Japan region.
Growth will be good in 2022 and 2023
Goldman Sachs says that if we look at the macro level, then next year there is a strong growth in GDP. Growth may increase from 8 per cent to 9.1 per cent. In such a situation, the market is expected to grow 24 percent in 2022 and 15 percent in 2023. % in 2023.
Consolidation for the next 3 to 6 months
Goldman Sachs says that many companies are in line to bring IPO this year. This will divert money from the secondary market to the primary market. Goldman Sachs says that the Indian market may see consolidation in the next 3-6 months and the performance of the broader market is expected to be weak. However, during this time money can be made in banks, commodity, real estate and infra sectors. However, investors are advised to focus on intra-market opportunities.