Citi’s Drew Pettit stays neutral on India, awaits earnings upgrades

Citi continues to hold a ‘neutral’ stance on India, which has underperformed over the past 12 months, according to Drew Pettit, Director – US Equity Strategy/ETF Analysis & Strategy Research at the investment bank. “Earnings revisions changing really could drive, I would say, allocation shifts. That’s a big determinant for us,” he said.

He contrasted India’s position with other emerging markets such as Korea and Taiwan, which Citi currently finds more attractive, given the availability of artificial intelligence (AI)-linked stocks at reasonable valuations.

Despite this cautious stance on India, Pettit remains constructive on US equities. After a volatile start to the year, he expects US markets to deliver a good year, supported by strong fundamentals and earnings growth. Citi’s base case is for a volatile but positive year, with a year-end target of 7,700 for the S&P 500.

Explaining the market dynamics, Pettit acknowledged frequent swings between fear and relief but stressed that the core driver behind Citi’s optimistic outlook is a “street high” forecast for earnings per share (EPS) in 2026. “Noise is going to come from headlines. Noise is going to come from rate volatility, it’s going to come from dollar volatility… But at the end of the day, it’s fundamental resilience, its earnings moving up and to the right,” he said.

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He added that intact secular growth stories and supportive cyclical trends continue to provide comfort on the US market outlook.

Addressing heightened geopolitical noise and policy uncertainty, Pettit cautioned against reacting too sharply to headlines — a key lesson, he said, from 2025. Until these developments translate into a tangible impact on fundamentals, markets can weather the turbulence. “As long as that trend of really good earnings revisions in the United States continues, we can live through this noise,” he said.

That said, Pettit flagged bond market volatility as a potential risk, particularly if it emanates from the Japanese government bond market, as this could affect how much investors are willing to pay for risk assets. However, he stated that stronger-than-expected economic growth could act as a counterbalance.

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For markets to sustain high valuations and reach targets such as 7,700 on the S&P 500, Pettit said a combination of factors is required. “You really need bond volatility to compress and stay low, and rates to stay low. That’s how you get sustainable higher valuations and really get that growth tailwind all at the same time,” he said, reinforcing that strong earnings growth remains the ultimate ‘cure-all’ for market worries.

For the entire interview, watch the accompanying video

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