Citi has come out with a year-end target of 26,000 on Nifty, projecting a 10% rise from current levels, riding on the fact that inflation may ease to 4.2% in FY26, creating room for rate cut by the central bank.
“India’s EPS growth outlook remains robust and relatively low risk given the diversified universe of listed companies,” Surendra Goyal, Strategist at Citi said in the note.
However, Citi is cautious on any recovery in the private investment climate, which is says 'could remain elusive'.
Even during the phase of foreign selling in October-November, Citi had remained constructive on India, willing to buy any declines. “… on 1Y/2Y, India’s outperformance is significant, and India’s valuation premium is significant to EM/China, prompting investor queries on risks to India from any rotation out. In our view, strong macro/growth outlook and resilient domestic inflows have been a major driver of Indian equities,” Citi had said in October.
FPIs had sold shares worth Rs 1.15 lakh crore in October-November, sending benchmark Nifty 50 into correction territory. A number of factors had led to the foreign selling, including high valuations, earnings disappointment, sluggish capex and China's revival stimulus.
However, domestic flows have remained robust, acting as a counter-balance against the foreign selling. Going forward, Goyal in his January note said foreign inflows from global funds will track the movement in the US dollar, in coming months. Soft consumer demand and a record low for the Rupee against dollar could be overhangs in any revival of sentiment.
In November, Citi had added Ramco Cements to its list of mid-cap picks, and excluded Devyani International, instead favouring Jubilant Foodworks.
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