Investing.com -- Citigroup forecasts over 10% upside for the Nifty 50, targeting 26,000 by December 2025, while it expects India’s fiscal deficit to narrow to 4.5% of GDP in FY26 from 4.8% in FY25. The reduction is attributed to higher corporate tax revenue and tighter revenue expenditure.
Gross tax revenue could rebound to a pre-COVID peak of 11.9% of GDP, while a reduced Reserve Bank of India (NSE:BOI) dividend, estimated at ₹1.6 trillion, may weigh on nontax revenue. Capital expenditure is likely to remain a focus, set at 3.2% of GDP, a 13% year-on-year increase. However, Citi warns fiscal consolidation will rely on rationalizing revenue spending, as interest and other key expenses may lag GDP growth.
General government deficit is projected to dip to 7.1% of GDP in FY26 from 7.3% in FY25. Gross bond issuance is pegged at ₹14.2 trillion, up 1% year-on-year, with net issuance at ₹11 trillion, down 5%. Higher utilization of GST compensation funds could pose downside risks.
Citi’s budget expectations include labour reforms, potential wage hikes, tax adjustments, updates to the Production Linked Incentive scheme, and guidance on debt consolidation and asset monetization. It sees positive sentiment from consumption-boosting measures and infrastructure, defense, and PLI spending, while capital gains tax hikes could dampen sentiment.
The brokerage maintained an overweight view on banks, healthcare, and telecom, and underweight on consumer discretionary, IT, and metals.