US brokerage firm Goldman Sachs on Tuesday upgraded the country to “overweight” on reducing external vulnerabilities and said it expected the Nifty to touch 7,600 points this year.

The upgrade comes after domestic scaled their lifetime highs last week.

“We upgrade India to overweight...The cyclical macro adjustments in the country have reduced the external vulnerabilities. We now expect domestic fundamentals to improve as growth recovers in Q2,” it said in a note dated March 14. Specifically, it said the cyclical macro adjustments had resulted in a reduction in external vulnerability, eased pressure on the current account, increased forex reserves and stabilised the rupee. It also advised clients to watch out for stocks which gain from the elections, which it termed an ‘important domestic catalyst’.

“Upcoming parliamentary elections in April could have an important impact on reform progress... Our analysis of past election moves, valuation and flows suggests the country may have more room for a pre-election rally,” the Wall Street giant said.

It said Oil and Natural Gas Corporation, Coal India, ICICI Bank and Larsen & Toubro to be among the stocks to benefit from the elections. On the risks front, it said an indecisive verdict can trigger outflows. It said the corporate earnings downgrade cycle had bottomed out and added that the gross domestic product growth will pick up from the second quarter onwards. On sectoral preferences, the note said the brokerage continues to be overweight on information technology and energy, it also added automobiles to the category.

It put banks, investment cyclicals and utilities in the market-weight category, while health care, staples, and telecom companies and real estate were in the underweight category.