15 stocks to buy: Goldman Sachs sees 10% upside for Nifty, says rotation to 'value' likely

Goldman Sachs in its latest note said it sees 10 per cent upside for the Nifty, as it believes foreign selling is largely over and sentiment should turn incrementally favourable amid an improving domestic outlook and ultra-light foreign positioning. The foreign brokerage said there are attractive stock-picking opportunities in largecaps, with a wider breadth of lower-valued stocks. Fundamentally, largecaps have seen relatively shallower earnings cuts than midcaps in the first half of 2026 and offer better earnings visibility, Goldman Sachs said.

Overall, the foreign brokerage preferred banks, tourism and energy refiners, while favouring largecaps over midcaps and value over growth. It also preferred power utilities over agriculture stocks and domestic economy-linked companies over exporters. Structurally, it remained bullish on the defence and energy security sectors.

"After a large equity drawdown in 1H, we see room to rebound from the lows. NIFTY lost 9 per cent in rupee terms in 1H 2026, and relative to the regional markets, Indian equities saw their worst returns in three decades. Looking ahead, while renewed geopolitical tensions in the Middle East may fuel near-term volatility, as domestic recovery starts to get priced in, we expect Nifty to rebound towards our June 2027 target of 26,500, implying c.10 per cent upside from current levels," Goldman Sachs said.

Goldman Sachs noted that MSCI India declined 5 per cent in the first half of calendar 2026, characterised by a 10 per cent de-rating in valuations amid fears of an economic slowdown, while forward earnings caught up.

"Stylistically, the 'Growth' factor outperformed the 'Value' factor as investors looked for growth that was scarce in a slowdown environment. Looking ahead, we expect a rotation from 'Growth' to 'Value' as investors look for undervalued or reasonably valued pockets in anticipation of a recovery ahead. The breadth of stocks trading at reasonable multiples has improved moderately to two-three year highs, providing an opportunity to pick reasonably valued stocks," it said.

Global equity investors used India as a funding market through the first half of 2026, selling a record $30 billion worth of Indian equities in a span of just 3.5 months. They have turned net buyers since mid-June, albeit modestly, with $2 billion of inflows, largely into financial stocks, Goldman Sachs said.

It said largecaps could see a tactical rotation on improving foreign sentiment and more reasonable valuations, adding that foreign ownership in largecaps dropped to decade-low levels in the March quarter, while remaining stable in midcaps, suggesting largecaps faced the biggest foreign selling pressure.

"Valuations for largecaps now look more palatable, having de-rated close to their 15-year average multiples, even as midcaps still trade significantly (+1.5 standard deviations) above average. Largecaps currently trade at a historically wide discount of 30 per cent to midcaps. Growth-adjusted valuations (PEG ratio) for largecaps also look more reasonable now, as their PEG ratio differential with midcaps has narrowed to 2020 lows," it said.

Stocks to buy

Goldman Sachs has identified 15 largecap stocks that are reasonably valued and could benefit from improving foreign investor sentiment, near-term macro catalysts such as Q2 results, strong bond inflows and a potential super El Niño, as well as structural growth themes such as defence and energy security.