Goldman Sachs has issued a forecast predicting earnings-driven gains for Chinese stocks in 2026, signaling the investment bank's optimistic outlook on the Chinese equity market's recovery potential. The forecast suggests that fundamental earnings improvements will serve as the primary catalyst for market gains.

Market Outlook and Earnings Focus

The Goldman Sachs forecast centers on earnings-driven growth as the key factor for Chinese stock performance in 2026. This approach emphasizes the importance of corporate fundamentals rather than external market factors in driving equity valuations.

Investment Bank's Assessment

Goldman Sachs' projection reflects the firm's analysis of Chinese market conditions and corporate earnings potential. The forecast indicates the investment bank's confidence in the underlying strength of Chinese companies and their ability to generate improved financial performance.

The earnings-focused approach to the 2026 forecast suggests that Goldman Sachs expects Chinese corporations to demonstrate stronger operational results, which would translate into stock price appreciation. This fundamental-based outlook provides insight into the investment bank's assessment methodology for the Chinese equity market.

Goldman Sachs expects India's fast-moving consumer goods sector to enter one of its strongest earnings phase in years, with 2026 bringing a rare combination of revenue and margin tailwinds. The brokerage anticipates meaningful acceleration in earnings growth as both toplines and margins improve across the sector.

Multiple Growth Drivers Converging

The investment bank identifies three key catalysts driving the optimistic outlook for 2026:

On the demand side, GST rate cuts and soft food inflation are positioned to lift mass-consumption categories including soaps, hair oil, shampoos and biscuits. The weak summer performance in 2025 has created a favorable base for beverages and other summer-linked products.

Preferred Stock Selections

Goldman Sachs has identified companies that benefit from both macro tailwinds and stock-specific catalysts:

Varun Beverages is particularly expected to see strong revenue growth as it cycles a weak 2025 summer in India, alongside margin improvement in its Africa operations through backward integration.

Earnings Downgrade Cycle Ending

The brokerage believes the worst of earnings cuts for staples is now complete. Several FMCG companies experienced noticeable earnings downgrades for the second half of fiscal 2025 and the first half of the current period as volume growth slowed and margins came under pressure. Ready-to-drink beverages and soaps were among categories particularly affected by the weak summer of 2025.

GST Impact and Market Dynamics

The GST cuts are expected to improve affordability, drive premiumization, boost price-point packs and shift market share from unbranded to branded players as price gaps narrow. The full benefit of these rate reductions will flow through from the December 2025 quarter onward.

Consumer Discretionary Outlook

While bullish on FMCG staples, Goldman Sachs remains cautious on parts of consumer discretionary, citing elevated valuations and intensifying competition in grocery retailing, paints and fashion. The brokerage's top pick in this space is Titan, which offers high visibility of over 20.00% earnings growth and currently trades toward the lower end of its sector valuation range.