Global brokerage Citi has lowered its target for the Nifty 50 index to 26,000 from 27,000, citing persistent geopolitical tensions, risks to corporate earnings growth, and concerns about India’s position in the global artificial intelligence (AI) ecosystem.
The Nifty 50 index last closed at 23,162, implying a 12 per cent upside from current levels. Citi has rolled forward its valuation framework to March 2028 earnings and now values the benchmark index at 18 times forward earnings.
While maintaining a constructive medium-term view on India, Citi said near-term headwinds could continue to weigh on foreign investor sentiment and market performance.
“Healthy medium-term outlook and low positioning imply that any resolution of the West Asia situation and pause in foreign portfolio outflows could result in upsides,” the brokerage said in a report.
Foreign portfolio investor (FPI) participation in domestic equities has weakened sharply over the past two years. According to Citi, India’s allocation within global emerging market (GEM) funds has fallen to a near five-year low, while the country’s underweight positioning among foreign investors is close to the highest level seen in two decades.
India’s weight in EM portfolios has declined to around 11 per cent from nearly 20 per cent in mid-2024, the report said. This has coincided with estimated FPI outflows of about $30 billion so far in calendar year 2026.
The brokerage attributed the subdued sentiment to a combination of geopolitical conflicts, climate-related risks such as El Niño, and the rapid evolution of AI-driven investment themes globally.
Citi said India currently remains a limited participant in the foundational infrastructure build-out supporting AI, creating concerns around the potential impact of automation on domestic employment, wages and consumption over the medium term. However, it believes the narrative could eventually shift in India’s favour as value creation migrates from AI infrastructure providers to software and services companies that benefit from AI adoption.
The brokerage also flagged a moderation in corporate earnings growth. Aggregate ebitda growth for BSE100 companies stood at around 6 per cent year-on-year in the March quarter, marginally below Citi’s expectations and historical trends. Consumer and materials sectors posted stronger growth, while financials and utilities underperformed estimates.
Despite foreign selling pressures, Citi highlighted the resilience of domestic investor flows as a key support for the market.
Domestic flows into equity assets under management have remained resilient, although any moderation remains a key risk, the report said.
The brokerage added that domestic equity valuations compared to other EMs and developed markets have become more reasonable after the recent correction and are now trading close to their 10-year average. Citi’s proprietary India Sentiment Indicator currently points to potential one-year forward returns of about 10 per cent.
On sector allocation, Citi remains overweight on financials, telecom, healthcare, utilities and defence, while maintaining an underweight stance on information technology services, consumer staples and metals.
