In a notable shift, Goldman Sachs and HSBC have recently upgraded their outlook on Indian equities. Goldman Sachs raised India to an “Overweight” rating, setting a target of the Nifty 50 at 29,000 by end-2026 (implying over 13 % upside). HSBC reiterated an overweight view on India in its Asia portfolio, targeting the BSE Sensex at 94,000 by 2026 (roughly 12.5 % upside).
These bullish calls come at a time when foreign institutional investors (FIIs) have remained net sellers of Indian equities, with outflows in 2025 exceeding ₹1.52 lakh crore.
The brokerage houses highlight a few key drivers behind their optimism:
- The year-long earnings downgrade cycle appears to have stabilised.
- Valuation gaps have narrowed: India’s price / earnings premium over Asia has fallen from ~85-90% to ~45%, moving closer to the long-term average of ~35%.
- India is being viewed as under-owned and potentially next in line for a global rotation away from over-hyped sectors (such as parts of the AI/tech trade).
- Domestic momentum: solid consumption, improving corporate mix and structural reform tailwinds.
But will FIIs actually return?
The upgrade in ratings provides a positive signal but does not guarantee immediate inflows. Some fund managers remain cautious and are waiting for clearer triggers such as:
- A decisive reversal in FII flows.
- Sustained earnings upgrades across sectors.
- Global macro stability (e.g., currency, rates, trade) which impacts emerging-market allocations.
What it means for investors
For domestic investors, this backdrop suggests that the risk-reward in Indian equities may be improving. Institutional capitulation appears to have run its course, valuations are less stretched, and global investors are now signalling interest. Nonetheless, timing the return of FII flows remains uncertain and markets may move ahead of actual flows.
In summary, Goldman Sachs and HSBC turning bullish on India could mark a turning point for FII interest—but execution, visibility of earnings and broader global context will determine when and how much capital actually rotates in.
