Wall Street major Goldman Sachs sees the Nifty 50 rebounding to 26,500 by June 2027, a level above its current record high of 26,373, as it turns more constructive on India following an improvement in the recent macro backdrop.

The brokerage said lower commodity prices, a stabilised currency, resilient domestic growth, healthy second-quarter earnings expectations and the potential recovery in select domestic sectors have improved the outlook for Indian equities.

"We see room for Nifty to recover towards our June 2027 target of 26,500, implying a 10% upside from current levels following a 9% drawdown in the first half," Goldman Sachs said in its report. Here’s what the bank said.

Ultra-light FIIs to return soon

Goldman Sachs believes the worst of foreign selling in Indian equities is likely over, with sentiment expected to improve as the domestic outlook strengthens and global investors remain significantly underweight on India.

The brokerage noted that global equity investors used India as a funding market during the first half of 2026, selling a record nearly $30 billion worth of Indian equities over just three-and-a-half months. Since mid-June, however, foreign investors have turned net buyers, albeit modestly, with inflows of about $2 billion, largely into financial stocks.

Also read: Morgan Stanley says Indian stock market poised for strong year ahead. Here’s why

According to Goldman Sachs, the current underweight positioning leaves ample room for global funds to increase their exposure to Indian equities. While a continuing earnings downgrade cycle and a relatively less attractive growth-valuation mix compared with other markets remain key concerns, the brokerage believes improving visibility on a domestic recovery could prompt investors to start pricing in the anticipated rebound.

“Improving visibility on domestic recovery will act as a catalyst for investors to start pricing in the anticipated recovery in advance,” the brokerage said in a note dated July 11.

Goldman Sachs expects a shift in market leadership in the second half of the year, with investors rotating from growth stocks to value plays. The brokerage said valuation de-rating weighed on market returns in the first half amid concerns over an economic slowdown, while growth stocks outperformed due to scarcity of earnings.

Looking ahead, it expects investors to increasingly favour reasonably valued segments as expectations of an economic recovery improve. Goldman Sachs also believes that as foreign outflows reverse in the second half, the biggest beneficiaries are likely to be the most-sold and attractively valued pockets of the market, particularly largecap stocks and banks.

The international brokerage recommends going long on banks, tourism and energy refiners in the second half of the year. The brokerage also prefers largecap stocks over midcaps, value over growth, power utilities over rural and agriculture-linked stocks, and domestically focused companies over exporters.

Read more: Goldman downgrades India, slashes Nifty target and warns of earnings cut. Here's why

From a structural standpoint, it remains bullish on the defence and energy security themes. On the sectoral front, Goldman Sachs has upgraded utilities to overweight and remains overweight on banks, energy refiners, TMT and defence. It remains underweight on exporters and downstream oil companies, while also downgrading select materials stocks to underweight.

Goldman Sachs' top stock picks

Goldman Sachs has identified 15 largecap stocks that it believes are well placed to benefit from key themes and catalysts in the second half of the year.

Its preferred picks are Reliance Industries, HDFC Bank, Adani Enterprises, Adani Power, Kotak Mahindra Bank, NTPC, Hindustan Aeronautics (HAL), Eternal, Power Grid Corp, Adani Green, InterGlobe Aviation, HDFC Life Insurance, Indian Hotels, Mazagaon Dock and MakeMyTrip.

In March this year, Global brokerage firm Goldman Sachs turned cautious on Indian equities, downgrading its stance on the market to “marketweight”, cutting its Nifty target and warning that an “energy‑shock‑led” earnings downgrade cycle is about to unfold. The US investment bank argues that higher‑for‑longer oil prices over tensions around the Strait of Hormuz have meaningfully worsened India’s macro outlook and will force consensus profit estimates lower over the next few quarters.

In March this year, Goldman Sachs turned cautious on Indian equities, downgrading its stance on the market to “marketweight”, cutting its Nifty target and warning that an “energy‑shock‑led” earnings downgrade cycle is about to unfold.

The US investment bank argues that higher‑for‑longer oil prices following tensions around the Strait of Hormuz have meaningfully worsened India’s macro outlook and will force consensus profit estimates lower over the next few quarters.