The benchmark stock indices on Wednesday ended higher for the third consecutive day amid correction. Citi Research maintained its bullish view on Indian equities as it added Cholamandalam Investment And Finance Co. and Zomato Ltd. to its top picks, while removing Hindustan Unilever Ltd. from the list.
The brokerage has retained Nifty’s December 2025 target at 26,000, suggesting a 14% upside potential.
Citi’s constructive view is supported by several positive macroeconomic factors. Key metrics, like the Current Account Deficit, Balance of Payments, inflation, and GDP growth, are on track, it said. It expects India’s GDP growth to reach 6.5% in financial year 2026E, up from mid-single-digit growth in the time period.
The government’s capital expenditure push, tax cuts starting April 2024, Reserve Bank of India liquidity easing, and potential rate cuts are also expected to drive economic growth. Citi also anticipates a rebound in Nifty earnings to a more robust level from current slow growth.
India Versus China
Citi compares India’s outlook with China’s, where growth has been uneven. While India’s economy shows signs of stability and recovery, China faces challenges in key sectors, especially real estate. Citi’s China economists predict 4.7% GDP growth in calendar year 2025E. In contrast, India is seen as more attractive with its domestic market focus and strong growth drivers.
India’s premium over China in the MSCI index is currently around 70%, a significant increase from the long-term average of 55% and a substantial shift from the 180% premium witnessed at recent market highs, Citi said. However, India remains relatively attractive from a valuation standpoint, particularly as foreign institutional investor outflows have eased, and domestic flows have remained resilient.
Citi’s Top Picks
One of the key changes is the upgrade of NBFCs to ‘overweight’ from ‘neutral’. NBFCs are well-positioned to benefit from favourable regulatory changes, interest rate trends, and an improving credit cost trajectory, according to the brokerage. As part of this shift, Chola Finance has been added to Citi’s top picks, due to its solid growth profile and improving credit cost outlook.
On the flip side, Citi has downgraded the staples sector to ‘underweight’, particularly after the sector failed to outperform despite low valuations. While Citi’s earlier neutral stance on staples was based on the belief that valuations would help the sector ride out a cyclical slowdown, this strategy has not played out as expected. As a result, Hindustan Unilever Ltd. has been removed from Citi’s top picks list.
In contrast, Zomato Ltd. has been added to Citi’s top picks, following a sharp correction in its stock price. Citi sees significant upside potential in Zomato, especially if there is any easing in competitive intensity in the sector. Execution in the company’s quick commerce business remains strong, and Zomato’s ability to manage competition could drive future growth.
. Read more on Markets by NDTV Profit.The brokerage has retained Nifty’s December 2025 target at 26,000, suggesting a 14% upside potential. Read MoreMarkets, Business, Notifications
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