Uncertain macro clouds equity outlook, says Citi

Citigroup Global Markets said global and local uncertainties related to economy and politics are clouding the outlook for Indian equities even as December quarter earnings were 'decent'.

Global growth concerns pertain to China and European Union, there are domestic political uncertainties due to upcoming general elections, geopolitical risks and weakness in consumption growth trends.

Upcoming A-share inclusion in MSCI EM index may also put some pressure on FII flow trends, said Citi. The firm said that valuations are relatively more reasonable bit it remains cautious on the domestic equities in the near term.


Citi believes that FY20 earnings expectations are too high at 20per cent plus and mid-teens earnings growth is more reasonable.

"With 9mFY19 (April-December) Sensex/NIFTY earnings growth at 12per cent/7per cent respectively, we see modest downside risks to FY19 Sensex/NIFTY expectations at 19per cent/12per cent," said Citi.

Citi has reduced underweight stance on IT services as a defensive move given domestic and global uncertainties over the next few months.