More correction ahead? Goldman Sachs downgrades Indian market

A day after Sensex and Nifty fell to two-month lows, Goldman Sachs has lowered its stance from overweight to neutral for India within its Asia/emerging markets allocations, citing slower economic growth and corporate profits. The brokerage has revised Nifty's 12 month target to 27,000 from the earlier 27,500, indicating bears could take control of the market during the period. 

The global brokerage said markets could 'time correct' over the next 3 to 6 months. Worsening earnings sentiment, an accelerating pace of earnings cuts and a weak start to results season "signal a flow-through to corporate earnings," it said. High valuations and a less supportive backdrop could limit near-term upside, it added.

On October 10, Bernstein Research downgraded Indian market to 'underweight' from 'neutral' it saw the market to be "quite vulnerable" in the near-term.

Bernstein Research cited record high relative valuations to China and emerging markets, high crowding risk which has expanded into large-caps, and the increasing pace of downgrades as factors behind lowering its stance on Indian equities. 

 In the previous session, Sensex ended 930 pts lower at 80,220 and Nifty fell to a two month low at 24,472, down 309 pts. The stock market saw across the board sell-off on Tuesday. All 19 BSE sectoral indices ended in the red. Capital goods, consumer durables and auto indices were the top losers falling 2091 points, 1552 pts and 1313 pts on BSE, respectively.