Citi Research Upgrades India to ‘Overweight,’ Sees 15% Nifty 50 Gain by Year-End

Citi Research analyst Surendra Goyal has upgraded its outlook on India from ‘Neutral’ to ‘Overweight,’ citing improving economic conditions and more reasonable stock valuations. The research firm has set a year-end target of 26,000 for the Nifty 50, representing a 15% increase from current levels.

Why the Upgrade?

Citi’s strategists see strong upside potential for Indian markets, especially with valuations becoming less demanding. They also believe India is well-positioned to outperform other emerging markets if global trade tensions or tariff risks resurface.

Alongside India, Citi has also upgraded Chile to ‘Overweight’ due to strong earnings growth projections and confidence from local strategists. Meanwhile, Saudi Arabia has been downgraded to ‘Neutral’ as weak earnings forecasts and expectations of lower oil prices weigh on its outlook. ASEAN markets have also been downgraded to ‘Underweight’ due to sluggish earnings growth.

Economic Outlook: Growth Rebound Expected

Citi’s economists expect India’s real GDP growth to recover to 6.5% in 2025, bouncing back from a low of 5.4% in mid-2024. The recently announced Union Budget for FY26 introduced personal income tax cuts, which should boost consumer confidence and spending. Public capital expenditure (capex) is also showing signs of revival, and the Reserve Bank of India (RBI) has started cutting interest rates, with a 25 basis points (bps) reduction already in place and an additional 50 bps expected in April or June.

Market Trends & Sector Preferences

At around 19 times forward earnings, Indian market valuations are close to their five-year average. Meanwhile, foreign investors have pulled out over $8 billion from Indian equities this year, even as domestic investors continue to inject over $4 billion per month.

Key themes shaping the market include:

1. Consumption Trends – Rural demand is picking up, while urban spending is slowing. Markets are watching how fiscal and monetary measures impact different sectors.

2. Capex Growth – Government spending on infrastructure is rebounding, and the private sector is expected to follow suit as capacity utilization improves.

3. Investment Flows – Foreign investor positioning in India is at its lowest level in 20 years, creating room for a potential comeback.

Citi remains bullish on banks, insurance, pharmaceuticals, and telecoms, while staying cautious on IT services, metals, and discretionary consumer goods.

Tariff Risks & AI Impact on IT Sector

While India’s economy is largely domestic-driven and less dependent on exports to the US or China, global commodity price fluctuations and a stronger US dollar could still affect market performance.

The rapid adoption of artificial intelligence (AI) is also set to impact Indian IT services companies. While AI presents new opportunities, it could also drive pricing pressures and competition, affecting overall profitability. Early signs of these trends are already emerging.

Final Takeaway

Citi Research remains optimistic about India’s growth trajectory and market potential, seeing it as a key outperformer in 2025. With improving macroeconomic conditions, a supportive budget, and a rate-cutting cycle underway, India’s stock market could be on track for significant gains in the coming months.