Citi expects the Nifty to reach 26,000, supported by mid-teen earnings growth and lower market valuations, as reported by CNBC TV18. India Head of Research Surendra Goyal noted that corporate earnings have remained stronger than expected, with consensus forecasts pointing to mid-teen EBITDA and earnings growth for both the current and next financial year. The brokerage believes India's equity markets are well placed for further gains as valuations have become more reasonable after a prolonged correction. According to Citi, the market is now trading at around 17 times earnings, roughly one standard deviation below its 10-year average, creating a more supportive investment backdrop. Goyal emphasized that India could become a relative beneficiary if global investors reduce exposure to AI-linked trades, though he cautioned that if the AI slowdown evolves into a broader global growth slowdown, all markets could come under pressure.
Only 10 Nifty 50 stocks traded above their 200-day moving averages on Wednesday, down from 38 in January, signalling weakening market breadth despite movements in the benchmark index. According to Business Standard, this sharp fall in the number of Nifty 50 stocks trading above their 200-DMAs suggests that the market's weakness runs deeper than the headline index indicates. The Nifty 50, at 22,623, is 6.6% below its own 200-DMA, with the 10 stocks still trading above their 200-DMAs including Eternal, Kotak Mahindra Bank, Trent, and Titan Company. Two days earlier, the count had fallen to six, its lowest level this year, while in early January, 38 stocks, or 76% were above the threshold. Anish Teli from QED Capital Advisors notes that "All bad news comes below the 200-DMA. Price factors in all the bad news before the actual event happens."
Citi continues to maintain a cautious stance on the technology sector despite the recent rebound in IT stocks, as reported by CNBC TV18. Goyal highlighted that intense competition, AI-led productivity gains, increasing adoption of Global Capability Centres (GCCs) and slower revenue growth remain structural challenges for the sector. He noted that a stabilising rupee could reduce the currency-related margin support IT companies enjoyed over the past year, while acquisitions and captive buyouts are increasing the amount of capital required to generate growth. The brokerage expects the next two quarters will provide a clearer picture of whether the sector's fundamentals are improving. Despite this caution, Goyal acknowledged that India could benefit if the AI-driven rally moderates globally, though he emphasized the need for selective sector approach.
Despite the target revision, PL Capital projects year-on-year EBITDA growth of around 18-19% in Q2, with the positive earnings momentum expected to continue through the reporting season. The brokerage noted that consensus earnings estimates have largely remained intact so far, while consumption trends and credit growth have shown signs of improvement. This earnings optimism comes as IT majors TCS and HCLTech reported encouraging quarterly performances, with RBL Bank more than doubling its net profit for the quarter ended September 30. The positive earnings momentum is expected to support domestic demand and earnings expectations despite persistent inflationary pressures. The report forecasted 16.2% sales growth and 14.7% EBITDA growth in Q2FY27, excluding oil & gas. However, rising input costs could weigh on profitability, with 16 of 27 industry segments expected to report lower EBITDA margins as companies feel the impact of higher-cost inventories purchased when crude oil and other input prices were elevated.
Beyond technology, Citi continues to favour private sector banks and healthcare, particularly hospitals, according to CNBC TV18. Goyal said hospital chains continue to benefit from low healthcare penetration and sustained demand, while private banks offer attractive valuations supported by healthy fundamentals despite foreign investor outflows. The brokerage expects two more rate hikes by the Reserve Bank of India (RBI), with the outlook depending on inflation and other macroeconomic variables. PL Capital remains overweight on capital goods, healthcare, banks, metals, diversified financials, telecom and ports, while maintaining an underweight stance on auto, IT services, consumer and oil and gas. In its model portfolio, the brokerage is adding GE Vernova T&D India and Marico, increasing weights in Mahindra & Mahindra, ICICI Bank, UltraTech Cement, Hindustan Unilever, Max Healthcare Institute and ICICI Prudential Asset Management Company. The high-conviction stock picks offer potential upside of up to 52.8%, with GE Vernova T&D India leading with a projected upside of 41.3%.
