Mumbai: Goldman Sachs downgraded its rating on Indian stocks to "underweight" on concerns about delayed growth recovery and rising vulnerabilities for the economy. This comes just a day after the Reserve Bank of India also downgraded growth forecast.
It said a high current account deficit remains a key vulnerability, which was a matter of concern reflected by Finance Minister P Chidambaram recently. Rising CAD has put sharp pressure on the rupee, which Goldman said will continue if capital flows dry-up.
The external funding environment has also become challenging causing RBI to tighten liquidity, the investment bank said in a note.
Goldman Sachs also expected corporate earnings to grow at 5 per cent for the current fiscal year and 11 per cent for the next year, below consensus estimates.
(With additional inputs from Reuters)
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