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After overtaking Hong Kong’s stock market in December, India currently has the fourth largest in the world, and is now valued at over $4 trillion.
Javier Ghersi | Moment | Getty Images
Citigroup analysts upgradedĀ IndiaĀ to “overweight” from “neutral” in their emerging markets allocation on Friday,Ā citing strongĀ earningsĀ andĀ economicĀ growthĀ momentum.
The brokerageĀ expectsĀ India’s blue-chip NSE Nifty 50 indexĀ to rise 7% between now and the end of the current financial year ending March 2025, setting a target of 23,900.
The Nifty 50Ā closed at 22,055.20 on Friday. The benchmark has underperformed the MSCI Emerging Market Index in 2024 so far.
Citi’sĀ viewĀ is underpinned by the expectation thatĀ India’s economy – the fastest growing among major peers – will remain strong, growing at 6.8% in the current fiscal.
The brokerage’s estimates imply anĀ earningsĀ CAGR of 13% between fiscal years 2024 and 2026, with the trajectory broadlyĀ stable, Surendra Goyal, managing director and head ofĀ Indian research atĀ Citigroup, said in a note on Friday, while also attributing theĀ IndiaĀ upgrade to sustainedĀ economicĀ growth.
It also attributedĀ India’s one-year forward price-to-earningsĀ (P/E) of 20x, which is slightly higher than the long-term averages, to aĀ stableĀ earningsĀ trajectory.
The brokerageĀ remains “overweight” onĀ India’s banks, insurers, public sector enterprises, autos and capital goods companies among others. It recommends “underweight” on information technology firms, metals, consumer durables and discretionary as well as paint companies.
CitiĀ downgraded China to “neutral” from “overweight”, saying the recent rally in its stock markets occurred despite weakening fundamentals.
Foreign portfolio investors have soldĀ Indian shares since the beginning of April, aggregating to about 191 billion rupees ($2.29 billion).
China’s markets, however, have benefitted from a rising share of foreign inflows, helped by valuations that are relatively cheaper thanĀ India’s.
Citi’s downgrade of China is in contrast to the actions of global brokerage Jefferies, which raised China’s weighting in its Asia Pacific ex-Japan relative-return portfolio.
CitiĀ reiterated its “overweight” rating on Taiwan and Korea, maintaining “underweight” on Latin American countries.
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