Citigroup downgrades India to "underweight" from "neutral", as part of its emerging markets review, saying a rebound in economic growth, corporate risk appetite and the investment cycle may not be as strong as current expectations.

Citigroup adds the "ongoing political battles and the upcoming 2014 elections may make this year noisy."

However, more government reform action, along with easing inflation and falling interest rates should support equities, added the bank.

Citi says Indian shares can at best rise 7 percent more from present levels.