Citi has upgraded India to ‘Overweight’ from ‘Neutral’ in its latest research report, citing attractive valuations, improving consumption trends amid tax cuts and potential 50 bps rate cut.
There is “meaningful upside” in Indian equities amid “less demanding” valuations, Citi said in a note. The report has downgraded ASEAN to 'underweight' from 'neutral' amid relatively weak EPS momentum and growth forecasts.
The brokerage expects the Nifty 50 index to touch 26,000 by December 2025, implying a 15 percent upside from current levels.
Citi’s upgrade comes as the Sensex, Nifty witness uncertainties, including concerns over US tariff policies. The report highlighted that India’s market remains relatively well-positioned to outperform, given its largely domestic-driven economy and lower exposure to international trade risks.
In Monday's trading session, the Sensex slipped for the fifth consecutive session. The index tumbled over 1 percent to fall below the crucial 75,000 mark, mirroring a weak trend in US equities and continued foreign fund outflows. The Nifty 50 also lost 1.06 percent to close at 22,553.35.
In the past five trading sessions, the Sensex has shed 1,542 points, or 2 percent, while the Nifty has declined 406 points, or 1.76 percent. Despite this correction, Citi remains optimistic about India’s medium-term prospects, citing supportive fiscal and monetary policies.
US President Donald Trump’s announcement of new reciprocal tariffs has rattled global investors, with markets wary of further policy shifts. However, Citi strategist Surendra Goyal pointed out that India’s listed companies have minimal direct exposure to trade with the US and China, reducing risks from escalating tariff tensions.
Key Drivers for the Upgrade
Citi’s report highlights three major factors supporting its bullish view on India:
Tax Cuts and Rising Consumption – The Union Budget for FY26 introduced personal income tax reductions, which are expected to boost consumer sentiment and demand, it said in its report.
Recovery in Public Capex – Recent data suggests a strong pickup in government capital expenditure, adding to growth momentum.
Easing Monetary Policy – The Reserve Bank of India (RBI) recently initiated its rate-cut cycle with a 25 basis points reduction. Citi’s economists anticipate another 50 basis points of easing in the coming months.
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