Goldman Sachs: India Ranks Among Top Global Markets in October as Investors Shift Focus from AI Stocks

Indian equities emerged as one of the top-performing markets globally in October, outpacing the broader Asia-Pacific region. Investors shifted their focus from AI-sensitive technology stocks to other sectors, particularly IT services, according to a report from Goldman Sachs Research. The Nifty index outperformed the Asia-Pacific region, excluding Japan, by 7 percentage points, reversing its earlier underperformance in 2026.

Shift in Investor Preferences

The trend within India’s technology sector was notable. Stocks categorized as AI enablers, which had previously outperformed the Nifty by 76 percentage points from January to September, lagged behind the benchmark by 6 percentage points in October. Conversely, IT services companies outperformed the index by 14 percentage points, emerging as the leading sector for the month. Goldman Sachs attributed India’s gains to a global portfolio shift away from AI-sensitive North Asian markets.

The recovery in October followed a challenging third quarter, during which the Nifty fell 10 percent from its peak. By early October, the index had rebounded 3 percent from its lows. The momentum continued into the week ending October 30, with the benchmark gaining 2 percent, compared to a 1 percent rise in the broader Asia-Pacific index.

Broader Market Trends

The rally was not confined to large-cap stocks; mid-cap and small-cap shares rose by 3-4 percent during the week. Pharmaceuticals saw a significant gain of 7 percent, while financial stocks advanced only 1 percent. Institutional flows also showed signs of improvement, with foreign institutional investors (FIIs) purchasing $1.2 billion worth of Indian equities during the week. However, net outflows for 2026 remained high at $31 billion. Domestic institutional investors (DIIs) added $400 million, bringing their total purchases for the year to $75 billion.

Earnings reports have provided additional support for the market. By the time of the report, companies representing 58 percent of the MSCI India index’s market capitalization had reported their July-September results. Their combined profits were tracking 15 percent higher than the previous year and 13 percent above the prior quarter. However, performance varied across sectors, with metals and mining, utilities, and healthcare companies delivering positive surprises, while cement, materials, and consumer discretionary firms reported more earnings misses.

Valuation Concerns

The recent rally has made Indian equities relatively expensive compared to regional peers. The market’s forward price-to-earnings ratio stood at 18.4 times, with a valuation premium over the broader Asia-Pacific region reaching 92 percent, nearing historical highs. With several large companies set to announce results in early November, investors are keenly awaiting earnings that could justify the market’s elevated valuations.