Goldman Sachs is cautious on ‘expensive’ India stocks before elections

Global headwinds and expensive stock valuations necessitate a cautious approach toward Indian equities in the short term as the country prepares for next year’s national elections, according to Goldman Sachs Group Inc.

“The sharp rally since end-March, expensive valuations and global macro risks (high oil, high US rates, strong dollar) warrant a tactically conservative stance over the next three to six months,” analysts including Sunil Koul and Amorita Goel wrote in a note.

While this year’s surge in equity markets makes for a great backdrop for Prime Minister Narendra Modi — who is seeking a third term in office — a sense of caution is building. Goldman’s view comes as overseas investors sold $2.3 billion worth of Indian stocks on a net basis in September, following six months of inflows.