India is on the cusp of a growth trajectory, positioning itself as one of the fastest-growing economies over the medium term, according to a recent note by international brokerage giant Goldman Sachs. In a detailed analysis, the brokerage highlighted that after a decade-long downcycle, India’s economic and earnings landscape has started to stabilize, showing promising signs of robust growth in the years to come.

Goldman Sachs pointed out that India’s earnings have been steadily stabilizing over the past few years. The brokerage noted that after enduring a prolonged downcycle, India has started to witness mid-teen profit growth momentum, which is expected to sustain well into 2030. This optimistic projection reflects a more stable and growth-driven earnings environment, which is crucial for attracting both domestic and international investors.

The earnings momentum signifies that the country is gradually moving towards a more mature economic phase, where profitability and earnings consistency become key drivers of growth. This momentum is supported by several structural reforms, policy initiatives, and an evolving business landscape that fosters innovation, investment, and expansion.

Goldman Sachs also highlighted the performance of the Nifty index over the past five years. The Nifty’s total earnings growth and market capitalization have both achieved an outstanding Compound Annual Growth Rate (CAGR) of 18%. This is a clear indication that the Indian stock market has been on an upward trajectory.

Goldman Sachs’ report sheds light on how the profit pool is expected to shift in the coming years. As India’s growth story evolves, investment cyclicals-sectors that typically thrive during economic expansions-are likely to witness a rise in their profit share. This category includes industries such as autos, real estate, chemicals, and industrials, which are expected to emerge as the primary beneficiaries.

Consumer cyclicals, which encompass sectors like retail, automobiles, and consumer goods, are projected to experience the highest absolute growth. This suggests that as India’s middle class expands and disposable incomes rise, there will be a greater demand for consumer goods and services, thereby driving growth in these sectors.

Furthermore, the brokerage emphasized a potential rotation in growth leadership towards power and new energy. This shift aligns with India’s focus on sustainable energy solutions, reducing carbon emissions, and promoting renewable energy sources. As the country continues to invest in clean energy infrastructure, companies operating in the power and renewable energy sectors are likely to witness substantial growth and profitability.

Given the favourable outlook, Goldman Sachs has issued a ‘buy’ rating on 20 stocks that it believes will be at the forefront of India’s growth story. These stocks represent a mix of sectors, offering investors exposure to different facets of the economy.

Here are the stocks that Goldman Sachs recommends as top buys: Reliance Industries (RIL), Larsen & Toubro (L&T), NTPC, Mahindra & Mahindra (M&M), UltraTech Cement, Power Grid Corporation, Adani Ports & Special Economic Zone, InterGlobe Aviation (IndiGo), Eicher Motors, Havells India, Polycab India, Ashok Leyland, Phoenix Mills, Uno Minda, Hitachi Energy, Astral, Embassy REIT, Kajaria Ceramics, Blue Dart Express, and Amber Enterprises.

These 20 stocks, spanning multiple sectors, provide a comprehensive representation of India’s growth potential. Notably, they include major players in sectors such as energy, construction, automotive, aviation, infrastructure, real estate, consumer goods, and logistics, all of which are expected to benefit from the country’s economic expansion.

Story first published: Wednesday, September 25, 2024, 12:41 [IST]