Citi sticks to December rate-cut call, says India’s valuations still rich

Citi’s Drew Pettit says the Federal Reserve is still likely to cut rates in December, even though market odds have fallen. He said Citi’s “house view is we still expect to cut in December,” noting that the bank expects mild weakness in economic data but not recession signals.Explaining how this shapes the equity view, Pettit said these would be “insurance cuts” meant to refine monetary policy, which should support global markets.

For India, he said earnings and fundamentals remain strong, but valuations have become full. “We want to see premium earnings growth, but we don’t want to see that fully reflected in valuations,” he said. Citi has moved India from overweight to market weight.

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On the global search for artificial intelligence (AI) related opportunities, Pettit said investors are not looking for an “anti-AI trade” but for “AI at a better price.” He said those opportunities are emerging in China, in some international markets, and in pockets of the US. India, he said, is not part of this rotation for now.He also pushed back against talk of an AI bubble. Pettit said Citi prefers the word boom rather than bubble. “People are taking profits when they can, and they’re buying on pullbacks,” he said, adding that this behaviour looks rational.

Pettit said 2026 could be supportive for equities worldwide as cyclicals and old-economy stocks start contributing more. Earnings for several global sectors have been flat for three years but may turn next year. “There is more breadth, there’s more things contributing,” he said, though mega-cap growth stocks will still drive global indices.

For the full interview, watch the accompanying video

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