India’s equity markets are well placed for further gains as earnings remain resilient and valuations have become more reasonable, even as global investors reassess the artificial intelligence (AI) trade, according to Surendra Goyal, India Head of Research at Citi.
Goyal said Citi continues to expect the Nifty to reach 26,000, supported by mid-teen earnings growth and lower market valuations. While India could benefit if the AI-driven rally moderates globally, he cautioned that the brokerage remains selective on sectors, particularly IT services, where structural challenges persist.
Goyal noted that corporate earnings have remained stronger than expected. He said consensus forecasts continue to point to mid-teen earnings before interest, taxes, depreciation, and amortisation (EBITDA) and earnings growth for both the current and next financial year.
He also pointed out that Indian equities have undergone a valuation correction over the past two years due to concerns around the country’s limited participation in AI infrastructure, high crude oil prices and global macro uncertainty.
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.
However, Goyal said that Citi continues to maintain a cautious stance on the technology sector despite the recent rebound in IT stocks.
He said intense competition, AI-led productivity gains, increasing adoption of Global Capability Centres (GCCs) and slower revenue growth remain structural challenges for the sector.
Goyal said 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.
He said the next two quarters will provide a clearer picture of whether the sector’s fundamentals are improving.
Goyal said India could become a relative beneficiary if global investors reduce exposure to AI-linked trades. However, he cautioned that if the AI slowdown evolves into a broader global growth slowdown, all markets could come under pressure.
Beyond technology, Citi continues to favour private sector banks and healthcare, particularly hospitals. 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.
Goyal said Citi’s economics team expects two more rate hikes by the Reserve Bank of India (RBI), while noting that the outlook will depend on inflation and other macroeconomic variables.
For the full interview, watch the accompanying video
India market setup remains positive despite AI reset, Nifty target at 26,000: Citi’s Surendra Goyal
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