Sydney/Singapore: Goldman Sachs Group Inc. has called time on the world-beating surge in Indian stocks. India’s benchmark indices—Sensex and Nifty—looks less favourable amid elevated valuations, a potential slowdown in economic growth and upcoming elections, according to Goldman Sachs analysts, who cut India to the equivalent of a hold rating from buy.

Goldman Sachs has been bullish on Indian stocks since March 2014 and the market has nearly doubled since then, returning more than twice that of global equities.

“The risk reward for Indian equities is less favourable," the analysts, including Sunil Koul, wrote in a report dated 16 September. “The key reasons for our less optimistic view include, among others, stretched valuations, multiple macro headwinds in the near term and election event risk."

India’s world-beating economic expansion that now faces tests from higher oil prices and a tumbling rupee has accompanied the stellar run for equities, confounding non-believers in recent years. The lack of breadth among rising stocks and uncertainty going into key elections next year are now becoming common refrains for those positioning for less rosy future returns.

Valuations have also gotten stretched and history points to negative absolute and relative returns when multiples get so far above average, according to Goldman Sachs.

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