Indian stock markets maintain a close correlation with the US stock markets, Goldman Sachs has said in a recent analysis. According to Goldman Sachs, whilst India’s economy remains comparatively protected from US economic deceleration, the stock markets of both nations demonstrate significant interconnectedness.
The analysis emphasised that India’s economy exhibits reduced vulnerability to American slowdowns compared to other nations, primarily attributed to India’s minimal trade reliance on the US.
According to ANI, the Goldman Sachs report highlights India’s relatively limited trade exposure as a key factor cushioning the economy against US economic volatility, especially when compared to countries with higher trade dependency. With merchandise exports accounting for just 12% of India’s GDP—versus 19% for China and a significant 82% for Vietnam—India is less vulnerable to external shocks stemming from the US economy.
“While the Indian economy is relatively insulated from a US slowdown compared to other markets that have higher trade with the US, there is a strong correlation between Indian equity markets and the US market,” the report stated.
Over the past two decades, India’s economic growth has largely remained independent of global economic swings, except during major global events such as the 2008 financial crisis and the Covid-19 pandemic. However, Indian equity markets continue to reflect movements in US counterparts, particularly post-2015.
Goldman Sachs noted a growing alignment between the Nifty 50 and the S&P 500 since 2015, with the two indices showing synchronized recoveries following the pandemic-induced market crash in early 2020. Both benchmarks reached record highs by late 2021 and have generally maintained upward momentum despite intermittent dips.
The analysis also pointed out that while India is relatively shielded, US economic slowdowns still impact specific sectors, notably merchandise exports and port container activity. The United States remains a major trading partner, accounting for 17.7 per cent of India’s exports and 6.2 per cent of its imports.
Given the potential for short-term challenges, Goldman Sachs urged caution in monitoring corporate cost structures and profitability. The firm has revised its valuation outlook, stating, “We cut multiples for some companies across our coverage to reflect a tougher operating environment.”