- Citi cut Nifty 50 target to 26,000 and lowered valuation multiple to 18x by 2028
- India's allocation in Global Emerging Market funds hits a five-year low amid FII outflows
- FII outflows total $30 billion year-to-date, near highest underweight in 20 years
As markets continue its volatile trajectory, Citi has cut its Nifty 50 target from 27,000 to 26,000 while lowering its valuation multiple from 19x to 18x, rolling forward to March 2028 earnings estimates. The brokerage firm cites higher EPS downgrade risks from the prolonged West Asia conflict.
In its latest note, Citi also noted that India's allocation in Global Emerging Market funds is currently at a five-year low, while FII underweight on India remains close to its highest level in 20 years. FII outflows have totalled $30 billion on a year-to-date basis.
Despite the bearish near-term positioning, though, Citi flagged that low allocation levels themselves create a case for a recovery. The brokerage said any resolution to the West Asia situation or a pause in FII outflows could lead to a meaningful upside from current levels. Its Citi India Sentiment Indicator is currently at levels suggesting approximately 10% one-year forward returns.
On the earnings front, headline Ebitda growth for the BSE 100 came in at approximately 6% on a year-on-year basis in the fourth quarter, marginally below estimates and below long-term trends. Consumer and materials sector delivered beats while financials and utilities missed estimates.
Citi's sector stance has Banks and Insurance, Pharma and Healthcare, Telecom, Energy, Defence, and Utilities as Overweight. IT Services, Metals, Paints and Consumer Staples are Underweight.
Among its top large-cap picks, Citi favours HDFC Bank, ICICI Bank, SBI, Polycab India, Bharat Electronics, Hitachi Energy, Sun Pharma and NTPC. Valuations, the brokerage noted, are near their 10-year long-term average and more reasonable compared to the past few years.
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