Citi India Strategy: Maintains a 20% overweight allocation on India

Citi's latest India strategy highlights mixed trends during the recent festive season, alongside strategic shifts in global allocations.

While festive demand across sectors varied, Citi remains confident in India’s positioning, maintaining a 20% overweight allocation on the country.

Festive Demand: A Mixed Bag

The commentary from companies regarding the festive season has been varied, with some reporting expectations being met while others fell short. Urban demand trends have been relatively muted, while rural markets have performed better, showcasing resilience.

Within specific sectors, jewellery, two-wheelers (2Ws), and e-commerce have emerged as bright spots, recording decent growth during the festive period.

Also Read: India Inc clocks muted sales in September quarter. More trouble coming?

However, other consumer-discretionary segments, such as fashion and apparel, have exhibited weaker performance, reflecting a subdued urban consumption trend.

Global Concerns Impacting Investor Sentiment

Citi notes that higher U.S. yields and inflation expectations are diminishing the likelihood of easing by the Federal Reserve (Fed) and the People's Bank of China (PBOC).

These macroeconomic concerns are contributing to anxiety about a potential "buyers' strike" among offshore investors. Many of these investors increased their exposure to China following the PBOC's initial stimulus measures in September, but the sustainability of this allocation is now in question.

Also Read: HSBC India Strategy: Targets Sensex at 90,520 by 2025; KIMS and Axis Bank among top picks

Tactical Allocation Shift

Amid these global uncertainties, Citi has reversed its tactical allocation strategy from early October. The firm has reduced its overweight position on China to a benchmark level while doubling down on India with a 20% overweight allocation.

This strategic decision underscores India’s relatively stable growth trajectory and its ability to weather external economic pressures.

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