Citigroup analysts have upgraded India’s rating to ‘overweight’ from ‘neutral’ in their emerging markets portfolio, citing significant upside potential and more reasonable valuations. The foreign brokerage forecasts that the Nifty50 index will reach 26,000 by the end of 2025 and highlighted that India could outperform other markets if tariff risks resurface.
Regarding tariffs, Citi noted that India’s economy is primarily domestically driven, with its listed companies having minimal exposure to trade with the US or China. However, the impact of commodity prices on earnings and the influence of a stronger US dollar on capital flows are key factors to monitor. Overall, the firm maintains a positive outlook on India.
Citi’s economists anticipate that India’s real GDP growth will rebound to 6.5% in 2025, compared to the recent low of 5.4% year-on-year for the June-September 2024 period. The Union Budget for FY26 has introduced personal income tax cuts, which are expected to enhance consumer sentiment and boost demand. Additionally, recent data indicates a strong recovery in public capital expenditure. The Reserve Bank of India (RBI) has also initiated a policy rate easing cycle, cutting rates by 25 basis points, with further reductions of 50 basis points anticipated in April and June.
On the artificial intelligence front, Citi expects declining AI deployment and inference costs to create new opportunities for Indian IT services companies. However, the brokerage also warned of potential risks, such as AI-driven productivity gains leading to pricing pressures and competitive deflation.
India’s one-year forward price-to-earnings (P/E) ratio stands at 19x—slightly above long-term averages—supported by an earnings trajectory that aligns with subdued expectations.
Citi remains ‘overweight’ on sectors including banking, insurance, pharmaceuticals, healthcare, telecom, energy, and cement. Meanwhile, it has given an ‘underweight’ rating to consumer discretionary, paints, IT services, and metals. The brokerage maintains a ‘neutral’ stance on consumer staples, real estate, non-banking financial companies (NBFCs), automobiles, and consumer durables.
