Monday Blues in Stock Market; Citi Predicts Nifty 50 to Reach 26,000 by December 2025

The Indian stock market experienced a significant downturn at the start of the trading week, marking the fifth consecutive day of decline for major indices. In February, both Sensex and Nifty 50 dropped by 5%, resulting in substantial losses for investors. The domestic market's weakness is primarily attributed to unfavourable global cues, leading to widespread corrections.

Despite the market's current challenges, there is positive news from the brokerage firm Citi. They have issued a bullish report on the Nifty 50 index, upgrading its outlook to overweight. Citi predicts that economic recovery and declining valuations will drive Nifty to new highs by December 2025. According to Citi Research, the Nifty 50 index is expected to reach 26,000 by year-end, indicating a potential 15% increase from current levels.

In February, the total market capitalisation of BSE-listed companies in India decreased by approximately 26 lakh crore rupees. This decline has caused the total market capitalisation of listed companies to fall below 400 lakh crore rupees. Economists at Citi Research anticipate a rebound in real GDP growth to 6.5% in 2025, driven by personal tax cuts that will boost consumer sentiment and increase consumption demand.

Historical Market Decline

The continuous selling in Indian stock markets has broken a nearly 28-year record. The market has significantly declined from its all-time high on September 27, 2024. Sensex has dropped around 13%, while Nifty has fallen approximately 14% from their record highs. This marks the fifth consecutive month of decline for Nifty 50, reminiscent of a similar downturn in 1996 when the index experienced a sharp correction between July and November.

Factors Behind Market Decline

The ongoing market decline is attributed to weak corporate earnings, continuous selling by foreign institutional investors, and economic uncertainty. These factors have contributed to Sensex and Nifty indices reaching their lowest levels in eight months.

Interest Rate Prospects

Citi Research's report suggests that interest rates may be reduced in upcoming RBI policy meetings. The Reserve Bank's Monetary Committee might cut rates further during their April and June meetings. Additionally, Citi analysed Donald Trump's aggressive tariff stance, noting that India's limited exposure could offer some relief due to its domestically oriented economy. However, commodity prices will impact earnings, and foreign investor flows will be monitored as the US dollar strengthens.

Brokerage Firm's Market Focus

Citi remains optimistic about India despite mixed consumption trends. While rural demand shows improvement, urban demand remains weak. The market is closely watching fiscal and monetary policies and company-specific trends. Public capital expenditure is improving with budgetary support for domestic manufacturing. Private investment will depend on capacity utilisation.

The global brokerage firm has assigned underweight ratings to IT services, metals, and consumer discretionary sectors while giving overweight ratings to banks, insurance, pharma, and telecom sectors.