Citi downgrades India to 'underweight' amid macro challenges
What's the story
Citi has downgraded India's stock market rating to 'underweight,' citing persistent macroeconomic and geopolitical challenges. The brokerage also noted weaker earnings projections as a reason for the downgrade. Despite the downgrade, Citi sees an 11.7% upside potential for the Nifty index, setting a target of 27,000 based on Friday's closing of 24,176.
Market performance
India scored poorly in Citi's model for some time
In a client note, Citi said, "India has scored poorly in our model for some time, though macro/EPS inflection looks trickier amid headwinds from higher commodity prices." The brokerage acknowledged that market positioning remains light and the pricing of earnings per share (EPS) outcomes seems more reasonable than other markets. However, it also noted that its earnings growth estimates for FY27-28 do not yet fully account for the impact of the Iran war.
Information
Sectoral preferences amid market challenges
Amid these market challenges, Citi remains bullish on certain sectors such as banks, telecom, defense, and pharma. However, it is underweight on consumer staples and IT services. This sectoral preference highlights the brokerage's strategic approach to navigating the current economic landscape in India.