Citi has turned constructive on Indian equities, projecting a 7% upside in the Nifty 50 by June 2026, with a target of 26,700 driven by resilient macro fundamentals, supportive domestic flows, and a potential revival in consumption and credit demand.
"We believe Indian equities are set up well here," Citi said in its India strategy note, citing a combination of factors, including resilient macro, valuation premium to emerging markets at long-term averages, and multiple stimulus measures such as tax cuts, rate reductions, and the recent GST overhaul.
Citi noted that Q1 earnings were largely in line, and while trends remain muted, Ebitda performance met expectations. "Earnings expectations at 11%, 2-year CAGR are reasonable and in line with long-term averages," the note added.
Citi outlines upside triggers for Nifty 50
The brokerage said that the domestic mutual fund flows rebounded in July, particularly in multi-cap and flexi-cap categories, while foreign institutional investors remain underweight on India, with positioning near 20-year lows. "MSCI India has underperformed MSCI EM and MSCI World by 19% and 13% respectively in dollar terms year-to-date,” Citi highlighted.
On the upside triggers, Citi pointed to a reduction in US tariffs, a pickup in consumption and credit, and stability in the earnings trajectory. “Earnings downgrades have weighed on the market CYTD; stability and then a better outlook could result in meaningful upside,” it said.
However, the brokerage flagged slower-than-expected consumption recovery as a key risk, especially in urban areas and discretionary segments like auto and consumer durables.
“Earnings estimates were already factoring in some consumption pickup ahead, especially during the festive season,” Citi noted, adding that channel checks and management commentary will be crucial in assessing the trend.
Citi's sector preferences include overweight positions in Financials, Telecom, Healthcare, and Cement, while it remains underweight on IT, Metals, and Staples.
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