New Delhi. Global brokerage firm Goldman Sachs has reduced the rating of the Indian equity market from 'overweight' to 'neutral'. This change has been made in Asia / Emerging Market Allocation, as the firm expects 'time correction' in Indian markets in the coming 3-6 months. However, the firm has also said that there is little possibility of a big decline in prices, but due to high valuations and lack of a supportive backdrop, the market boom may be limited.

According to a news by Moneycontrol, although the status of the Indian stock market is still intact, its pace is slowing down due to the decline in economic growth and quarterly profits. Analysts say that the earnings of Indian companies are declining. The main reasons for this are the high base, decrease in demand, and decline in profit margin.

Second-quarter earnings had an impact.
Major brokerage firms such as Motilal Oswal Financial Services, Nuvama Institutional Equities, and Axis Securities have said that the earnings of companies in the second quarter (July-September) of FY 2024 are likely to have the slowest growth in the post-Covid era. According to Motilal Oswal, Nifty's earnings growth will be the slowest in the last 17 quarters and profits will grow at a rate of only 2%. After riding the double-digit earnings growth of the last four years, there are no signs of a challenging phase starting on this path.

Nifty target
Keeping these challenges in mind, Goldman Sachs has reduced the 12-month target for Nifty to 27,000 from 27,500 earlier. However, the firm believes that a gain of about 9 percent is still possible from this new target. In the coming three months, Nifty may fall by about 1 percent to 24,500, but then in the next six months, it is likely to reach 25,500 with a gain of 3 percent.

Which sectors are in focus?
In terms of sectors, Goldman Sachs has kept automobiles, telecom, and insurance sectors on overweight, which means these sectors can perform better. Apart from this, real estate and internet sectors have also been upgraded to overweight. On the other hand, cyclical sectors like industrials, cement, chemicals, and financials have been downgraded.

Advice to investors:
Given the current market volatility, Goldman Sachs has suggested investors to focus on good quality, earning visibility, and targeted alpha themes. These strategies can help avoid market volatility in the current times.