Goldman Sachs upgraded Indian stocks to marketweight from underweight in its latest Asia-Pacific Quarterly Outlook report dated March 22, saying domestic growth will pick up, while stock valuations remain relatively attractive.

Goldman set a March 2013 target of 6,100 for the Nifty <.NSEI> index, with Yes Bank and cigarette maker ITC among the bank's top stock ideas for the region.

Global risk factors that had hit Indian equities late last year had largely abated, while the uncertainty behind the regional elections in Uttar Pradesh and the unveiling of the 2012/13 federal budget had dissipated, Goldman said.

Indian growth will pick up to 7.2 percent this year and 7.8 percent in 2013, from 6.9 percent last year, Goldman added, while slowing core inflation would allow Reserve Bank of India to cut the repo rate by 150 basis points during fiscal 2013.

We believe growth will indeed pick up in India over the next one to two quarters and that the equity market will start to reflect these prospects in the coming months, Goldman said in its report.

On challenges, Goldman said oil prices remain the most significant risk to their positive view on India.

The Nifty was up 0.2 percent at 5,238.15 points as 0455 GMT (4.55 a.m. British Time).

(Reporting By Abhishek Vishnoi and Manoj Dharra; Editing by Harish Nambiar)

(Corrects time in last paragraph to 0455 GMT from 0555 GMT)