According to the foreign brokerage firm, investors across all asset classes in London have a consensus over-weight on India vis-a-vis other emerging markets and their consensus view was that "India was a winner staring in your face".
The bullishness was largely owing to the "cleanest political story coupled with a strong credible central bank" and a likely pick-up in growth coupled with lower inflation and current account deficit.
However, risks to the story include implementation and delivery, monsoons and Geo-political factors.
India's GDP slowed to sub-5 per cent in FY14, mainly due to collapse in investments and the growth is expected to pick up to 5.6 per cent in FY15, 6.5 per cent in FY16 and 7 per cent in FY17, Citigroup said.
"The new government's focus on boosting investments and infrastructure is likely to revive growth," the report said.
Meanwhile, the CPI is likely to average at around 8 per cent in FY15 and 6.5 per cent in FY16. Though deficient monsoon is a risk factor in the near term, but it is not likely to impact the medium term target of 6 per cent by January 2016.
Despite the 20 per cent run up in Sensex on year-to-date basis, equities still remain the most-preferred asset class as there is a significant upturn in the policy cycle, boosting profitability of companies, the report said.
"Though Sensex has been trading at all-time highs, the valuation (P/E) ratio is not stretched," Citigroup said.
Meanwhile, foreign portfolio flows continue to be positive as equities remain the most preferred asset class and domestic flows are likely to pick up on higher financial savings.
Efforts to reverse the declining trend of financial savings and positive return of more than 21 per cent in equities so far this year is expected to entice investors, the report added.