Citigroup Inc. has advised investors to increase bullish positions on Brazilian equities and local-currency bonds, following Flavio Bolsonaro's stronger-than-expected showing in the first round of the presidential election.

"Bolsonaro is the more market-friendly candidate, pledging fiscal austerity, privatizations, deregulation and a reduction in value-added tax," Citigroup strategists wrote in a note. "The strong performance of his party in the Senate should help push his legislative agenda through," they added.

Citigroup said prediction market pricing indicates a high probability that Bolsonaro will win the October 25 runoff, and recommends buying Brazilian stocks as well as government bonds maturing in 2031, known as NTN-Fs.