Nifty target raised to 28,000 from 26,000, says Citi; here's why

Citi has raised its target for the Nifty to 28,000 from 26,000 earlier.  The foreign brokerage cited a decent earnings outlook, lower oil price risks and potential flows into non-AI assets following the US midterm elections. The fresh target suggests 12 per cent potential upside over the prevailing level of 24,986.40.

Citi's target comes as HSBC upgraded India's equity rating to 'Overweight' from 'Neutral', citing resilient earnings and more reasonable valuations.

Citi expects Nifty earnings to grow at a compounded annual rate of 15-16 per cent over FY26-FY28, with September quarter results sustaining the momentum seen in the June quarter, Bloomberg reported, citing the foreign brokerage.

Lower crude prices could support both the macroeconomic backdrop and corporate earnings. A $10 decline in oil prices improves the current account deficit by 30-40 basis points (bps), lowers inflation by about 50 bps and boosts Nifty earnings per share (EPS) by about 2 per cent, Citi said.

It has extended its forward estimates to December 2027 from September 2027 and raised the multiple for India's equity benchmark to 18 times from 17 times.

A more measured pace of AI spending following the US midterm elections could encourage a rotation into non-AI assets, potentially benefiting Indian equities, Bloomberg reported, citing Citi. “Over the past two years, AI has crowded out almost everything else. Our analysis suggests a 100bp increase in India active weight could drive $12 billion of inflows; combined with resilient domestic flows, creating a supportive backdrop,” it said.

Citi said some industrial stocks exposed to the data centre theme may continue to see near-term pressure.

Key risks include volatility in the Middle East, a slowdown in consumption and the impact of AI on employment.