Goldman upgrades China growth, cuts India outlook

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Goldman Sachs has raised its gross domestic product (GDP) forecast for China to 7.6 percent from 7.4 percent for 2013, even as it slashed the growth targets for India and other Southeast Asia nations.

The move comes as recent economic data out of China, including the latest purchasing managers indexes (PMI) for August, have pointed to stabilization in the world's second largest economy. China's official PMI released over the weekend showed factory activity rising to a 16-month high of 51 in August, up from 50.3 in July.

(Read more: China PMIs impress but analysts warn of risks ahead)

"Our China economists revised up their GDP (forecast) as growth appears to have accelerated in the third quarter with signs of a pickup in external demand and supportive domestic policies," the bank said in a note, adding that its estimate for 7.7 percent growth in 2014 remains unchanged.

On the other hand, Goldman slashed India's growth outlook, expecting the economy to grow just 4 percent for the fiscal year ending March 2014, from 6 percent previously. It also cut growth targets for fiscal year ending March 2015 to 5.4 percent, from 6.8 percent previously.

(Read more: China a 'stallion' amid emerging market turmoil)

Asia's third largest economy slowed to 4.4 percent in the June quarter, underperforming market expectations, from 4.8 percent in the preceding three months. The South Asian nation has been the whipping boy of the emerging market rout in recent weeks, as concerns over the country's slow growth, high inflation, wide current account and government policy flip-flops pummeled the rupee to fresh record lows.

Apart from India, the U.S. investment bank also cut its full-year growth estimates for Indonesia, Thailand and Malaysia to 5.4 percent, 4 percent and 4.6 percent, respectively, from 6 percent, 4.6 percent and 5.1 percent.

(Read more: Goldman downgrades emerging Asia currencies)

But one emerging market nation that got a thumbs-up from Goldman is Philippines, which last week reported robust growth of annualized 7.5 percent for the second quarter. Goldman now expects the economy to grow 6.8 percent for 2013, up from its previous forecast of 6.2 percent.

—By CNBC's Ansuya Harjani; Follow her on Twitter @Ansuya_H