Investment bank Goldman Sachs downgraded Indian stocks to “underweight”, citing worries over weak growth recovery and rising vulnerabilities for the economy.

“Recent activity data in the second quarter of 2013 has been sluggish with no signs of a pick-up in investment demand… Against a backdrop of lower growth, tighter liquidity and rising macro vulnerabilities, we downgrade India to underweight,” Goldman Sachs said in a statement.

Goldman pointed out high current account deficit(CAD) is a major risk for Indian economy. The rising CAD has put sharp pressure on the Indian rupee, which is trading near a record low hit in July.

Goldman Sachs also expected Indian corporate earnings to grow at 5 percent for the current fiscal year and 11 percent for the next year.