Global brokerage Citi has revised its outlook on Indian equity markets, cutting its Nifty 50 target to 26,000 from 27,000 while also lowering its valuation multiple to 18x from 19x. The firm has rolled forward its estimates to March 2028 earnings, reflecting a reassessment of near-term risks amid persistent global uncertainty and market volatility. The downgrade comes as investors remain cautious about earnings visibility in the face of ongoing geopolitical tensions.
According to Citi’s latest note, heightened risks stemming from the prolonged conflict in West Asia have increased the probability of earnings per share (EPS) downgrades across Indian markets. The brokerage indicated that such external shocks are likely to weigh on sentiment and valuations, particularly in export-sensitive and cyclical sectors that are more exposed to global disruptions.
Citi also highlighted that India’s allocation within Global Emerging Market (GEM) funds has declined to a five-year low, signalling reduced institutional interest at a global level. At the same time, foreign institutional investors (FIIs) remain significantly underweight on India, with positioning close to the most negative levels seen in the past two decades. Year-to-date FII outflows have already reached approximately $30 billion, adding sustained pressure on domestic equity inflows and liquidity conditions.
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Despite the bearish near-term outlook, Citi noted that such extreme positioning could also set the stage for a potential rebound. The brokerage argued that historically depressed allocations often precede periods of recovery, as even marginal improvements in sentiment or flows can trigger sharp market reversals. A resolution or de-escalation of the West Asia conflict, or a slowdown in FII selling, could therefore act as a meaningful catalyst for upside from current levels.
The report also pointed to Citi’s India Sentiment Indicator, which currently suggests the possibility of approximately 10% one-year forward returns. While this reflects underlying caution, it also implies that risk-reward dynamics may gradually improve if external conditions stabilise and domestic earnings hold up better than expected.
On the earnings side, Citi observed that headline EBITDA growth for the BSE 100 index stood at around 6% year-on-year in the fourth quarter. This figure was marginally below market expectations and also weaker than long-term trend growth. Sectoral performance remained mixed, with consumer and materials companies delivering stronger-than-expected results, while financials and utilities lagged estimates.
Overall, Citi’s revised stance reflects a delicate balance between near-term headwinds and medium-term recovery potential. While global risks, FII outflows, and muted earnings growth continue to weigh on sentiment, the brokerage suggests that already-heavy positioning and subdued allocations could create conditions for a sharper recovery if macro and geopolitical pressures begin to ease in the coming months.
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