Outlook for India ‘lot better than’ for China: Citi

Citigroup Inc has upgraded India and downgraded China in the emerging market allocation. In a note they wrote today, Citi strategists upgraded India to overweight on strong earnings momentum and projected growth.

In an interview with a business news channel, Citi global chief economist Nathan Sheets said that the geopolitical issues and United States-China tensions are a major headwind for the Chinese economy. “So, looking at a 10-year trajectory and a 10-year horizon, I like the outlook for India a lot better than I liked the outlook for China,” he added.

On the subject of the US Federal Reserve rate cut, Sheets said “I am still hopeful that maybe we can get the two [rate cuts] instead of the one, but we have got to see better inflation performance than we saw during the first quarter. And the US Fed is going to have to keep rates where they are for a while longer.”

Sentiments among global investors regarding the Indian equity market are remarkably positive—in fact, most optimistic he has witnessed throughout his career. Much of this positivity, he added, stems from concerns about the geopolitical dynamics between the United States and China. Many money managers and corporations, he said, are contemplating diversification away from China, thus viewing India favorably as a beneficiary in this rebalancing process.