Foreign brokerage Citi has cut Nifty's 12-month target to 26,000 from 27,000 earlier, as it believes a risk of higher earnings downgrades persist in case geopolitical tensions does not ease. The foreign brokerage said higher input costs and potential price hikes are near-term risks, even as India's valuation looked reasonable relative to long-term averages after the recent selloff and domestic demand trends, Bloomberg quoted a Citi note as saying. 

On Thursday, Nifty was trading at 23,205.35, down 9.60 points or 0.04 per cent. Citi's target still suggests 12 per cent potential upside for the 50-pack index in the next 12 months. The fresh downward revision in Nifty target comes months after Citi cut its Nifty target to 27,000 from 28,500 in March. 

As per Bloomberg, Citi analysts Surendra Goyal and Vijit Jain said Indian allocation in global emerging market funds is near five-year low and that active underweight positioning is close to the highest level in two decades. 
The foreign brokerage is overweight on utilities, defence, telecom and healthcare sectors. It is underweight on information technology, metals and consumer staples.  

As per CNBC TV-18, Citi said geopolitics, AI and El-Nino risk have resulted in a subdued sentiment, particularly among foreign institutional investors. The tepid sentiment among FIIs for India is driven by concerns, primary among them is the geopolitical tensions and the resulting macro challenges, which also prompted multiple forex-related measures announced by the Reserve Bank of India, CNBC TV-18 quoted Citi report as saying.

Meanwhile, MOFSL in a fresh strategy note said the market will remain hostage to volatile developments arising from the West Asian crisis. Higher commodity prices will be the key monitorables, as a prolonged elevated level could affect India’s macro parameters and engender a tight monetary policy stance, it said.

"We expect corporate earnings to outpace GDP growth, with Nifty earnings forecasted to grow 15-16 per cent YoY in FY27. This growth is anticipated alongside a nominal GDP growth rate of 11.0-11.5 per cent YoY in FY27E, which will further enhance the corporate profit-to-GDP ratio in the coming years," it said.