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Citi Research expects India's Nifty 50 to rise 10% by the end of 2026, driven by rising consumer demand, rural spending, and signs of urban recovery. Indian equities have underperformed other emerging markets in 2025 despite brief record highs in November. Analysts say subdued earnings, higher tariffs, and limited AI-related growth are easing, while stable inflation and resilient GDP growth are expected to support the market. Citi forecasts strong Nifty earnings, a USD 20 billion balance of payments surplus, and the rupee at 91 per U.S. dollar, with sectoral opportunities in banks, telecom, and autos.
Citi Research has projected that India's benchmark Nifty 50 could reach 28,500 by the end of 2026, marking an increase of over 10% from its recent close. The brokerage attributes this potential growth to rising consumer demand, strong spending in rural areas, and early signs of a recovery in urban markets. This projection aligns with similar forecasts from HSBC, J.P. Morgan, and Nomura in recent weeks. Advertisement
The Nifty 50 has recorded a 9.3% gain in 2025 so far, though it has lagged behind other emerging market and Asian peers. Both the Nifty and the 30-stock BSE Sensex reached record highs in November after 14 months, but the rally was short-lived. Economists surveyed by Reuters expect the Nifty to reach 28,500 by the end of 2026 and 28,850 by mid-2027.
Citi analysts Surendra Goyal and Vijit Jain pointed out that the factors weighing on Indian equities this year-subdued corporate earnings, relatively higher tariffs compared with other emerging markets, and limited exposure to artificial intelligence-related growth are now easing. They emphasized that stable inflation and resilient economic growth in India could provide strong support for equities in 2026. Analysts also noted that growing confidence in low double-digit earnings growth, along with the potential for a favourable U.S.-India trade deal in the coming months, could help the Indian stock market regain momentum.
Corporate earnings had already shown improvement in the September quarter, supported by fiscal and monetary measures. Citi forecasts that Nifty earnings per share could grow 13-14% year-on-year in fiscal 2027, nearly double the 7% growth expected in fiscal 2026. India's GDP is expected to remain healthy at around 7.1% in fiscal 2027, slightly below last year's 7.5%, with stronger discretionary demand, faster corporate and retail credit growth, and stable asset quality driving the corporate earnings recovery.
Citi also projects a balance of payments surplus of USD 20 billion in fiscal 2027, backed by an improving current account and returning capital flows. The brokerage expects the Indian rupee to trade around 91 per U.S. dollar during the same period.
From a sectoral perspective, Citi remains overweight on banks, telecom, autos, healthcare, and defence, while underweight on IT and consumer staples. Kotak Mahindra Bank and GAIL have been removed from its top large-cap picks, while Mahindra & Mahindra has been added. Aavas Financiers has been included in Citi's preferred mid-cap basket. Other contrarian stock ideas highlighted include ICICI Prudential Life, Jubilant FoodWorks, HPCL, Lupin, and Voltas.
Source Reuters
5th Jun, 2025
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