New Delhi [India], November 10 (ANI): India's benchmark Nifty could rise to 28,000 by December 2027, offering an upside of around 12 per cent from current levels, as improving corporate earnings, lower crude oil prices and a more measured pace of artificial intelligence-related spending support the domestic equity market, according to a report by Citi.

The brokerage has raised its Nifty target to 28,000 from 26,000 earlier, increasing its valuation multiple to 18 times from 17 times and extending its target period to December 2027 from September 2027.

Citi said multiple factors were aligning in India's favour, including an earnings growth outlook of around 15 per cent annually between FY26 and FY28, lower-than-feared oil prices and a possible shift in foreign investor flows towards markets outside the artificial intelligence-driven investment theme.

The report said corporate earnings trends remained strong in the second quarter, building on the positive momentum seen in the first quarter despite elevated commodity prices. Both Citi and market consensus estimates point to annual earnings growth of around 15-16 per cent over FY26-28.

On crude oil, the brokerage said lower prices could improve India's economic outlook and corporate earnings. It estimated that a USD 10 per barrel decline in oil prices could reduce the current account deficit by 30-40 basis points and inflation by 50 basis points.

Citi also expects a more measured pace of AI-related capital expenditure following the US midterm elections to support investment flows into non-AI assets, potentially benefiting Indian equities. It noted that the AI investment cycle remains intact, but slower spending could encourage investors to diversify their portfolios.

'Over the past two years, AI has crowded out almost everything else,' the report said, adding that a 100-basis-point increase in India's active weight in global emerging market portfolios could generate around USD 12 billion in inflows.

The brokerage noted that foreign investor inflows had already shown signs of improvement, with around USD 6 billion entering Indian markets over the preceding three weeks, while domestic investment flows remained resilient.

However, Citi flagged risks from geopolitical developments in the Middle East, a possible slowdown in consumption as GST-related benefits are compared against a higher base, El Nino conditions and the potential impact of AI on employment.

It said sustained earnings growth and resilient domestic flows would remain important in supporting the market's outlook. (ANI)