(Bloomberg) — A deepening slowdown in corporate earnings is fueling fresh concern over India’s $4.1 trillion stock market, and threatening to undermine Prime Minister Narendra Modi’s latest efforts to revive growth.
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Citigroup Inc. and HSBC Holdings Plc are among banks that have cut profit forecasts as the latest earnings from some of India’s top firms, including Adani Enterprises Ltd. and Tata Motors Ltd., trailed estimates. Local brokerage JM Financial Ltd. expects the benchmark NSE Nifty 50 Index’s earnings to grow less than 5% this fiscal year, the slowest pace since the pandemic. Some strategists say even that forecast may be too optimistic.
To make matters worse, the global backdrop is becoming more challenging as US President Donald Trump’s tariff policies spur uncertainty and raise the odds of further dollar strengthening. Some strategists are skeptical that the record $11.5 billion in tax cuts announced by Modi’s government last week will be enough to counter these headwinds and help earnings recover.
“There is room for downward revisions as we don’t think there is going to be a V-shaped recovery in earnings,” Rajat Agarwal, an Asia strategist at Societe Generale Pvt., said by phone. “Tax cuts are not a big positive for the earnings recovery, as consumption has a lower multiplier effect on the economy than capex.”
At the heart of the issue is India’s economic slowdown. The global growth champion is stumbling after a pandemic-era consumption boom slowed and inflation spiked. The government has lowered its growth projection for the fiscal year to the weakest since the pandemic.
JM Financial expects profits for the three months ended December to be up just 4.4% year-on-year, making it a third straight quarter of single-digit growth. Out of the 39 Nifty 50 companies that have posted results so far, earnings for 19 have missed estimates, data compiled by Bloomberg show.
And markets are punishing weak results. Tata Motors, the Indian parent of luxury sport utility vehicles Jaguar Land Rover, saw its shares plunge more than 7% after it reported a 22% drop in net income, missing expectations. Maruti Suzuki India Ltd., the biggest carmaker, also saw its stock drop after profit missed estimates, hurt by higher input costs mainly due to the rupee’s slide against the US dollar.
