Global financial giant Citi has raised its target for India's Nifty index to 28,000, up from its previous forecast of 26,000. This bullish revision comes as the brokerage cites a strong earnings outlook, a decline in oil price risks, and potential capital flows into non-AI assets following the US midterm elections.
Citi anticipates Nifty earnings to grow at a compounded annual rate of 15-16% between fiscal years 2026 and 2028. This momentum is supported by sustained strong performance, building on the positive results seen in recent quarters.
Key Drivers for the Nifty Upgrade
Several factors underpin Citi's optimistic forecast:
- Lower Oil Prices: A significant factor is the declining crude oil prices. Citi analysis suggests that a $10 fall in oil prices can improve India's current account deficit by 30-40 basis points, reduce inflation by approximately 50 basis points, and boost Nifty's earnings per share (EPS) by about 2%.
- Robust Earnings Outlook: The brokerage noted that Indian corporate earnings have shown resilience, with September quarter results maintaining the positive trend from the June quarter. This consistent performance provides a solid foundation for future growth.
- Potential Capital Rotation: Following the US midterm elections, Citi expects a more measured pace of AI spending. This could encourage a rotation of global capital into non-AI assets, potentially benefiting Indian equities. The firm's analysis indicates that a 100 basis point increase in India's active weight could attract $12 billion in inflows, supplementing strong domestic investments.
Citi's upgraded target aligns with other positive sentiments towards Indian markets. HSBC recently upgraded India's equity rating to 'Overweight' from 'Neutral', citing resilient earnings and more reasonable valuations.
Risks to the Outlook
Despite the positive outlook, Citi also highlighted several potential risks that could impact the Nifty's trajectory. These include ongoing volatility in the Middle East, a potential slowdown in domestic consumption, and the broader impact of artificial intelligence on employment trends globally.