U.S. tariff affect: India sees Asia’s largest earnings downgrades

Indian corporations have seen the steepest earnings downgrades in Asia, with analysts slashing forecasts as steep U.S. tariffs heighten dangers to progress even when proposed home tax cuts assist cushion the affect.

According to LSEG IBES information, ahead 12-month earnings estimates for India’s massive and mid-cap companies have been reduce by 1.2% up to now two weeks, the sharpest in Asia.

The cuts comply with a lacklustre season of quarterly earnings reviews extending a bout of weak point amongst listed companies which kicked off final 12 months and has damage benchmark fairness indexes.

India’s economic system is essentially home and companies that are a part of the Nifty 50 index earn solely 9% of income from the U.S. however the tariff hike to as excessive as 50% on exports to the world’s largest economic system presents a danger to financial progress.

Analysis by MUFG signifies {that a} sustained 50% tariff might reduce India’s GDP progress by 1 share level over time, with the most important hit to employment-sensitive sectors resembling textiles.

Looking to buoy home consumption, Prime Minister Narendra Modi not too long ago introduced sweeping tax reforms to spice up the economic system within the face of a commerce battle with Washington.

“It’s a little bit of an interesting time given what’s happened with the tariffs that have been imposed on India,” mentioned Raisah Rasid, international market strategist at J.P. Morgan Asset Management.

Valuations are nonetheless elevated and “we could potentially see the tariff triggering a broad valuation re-rating downwards and make some of the domestic oriented stocks attractive,” she mentioned.

Earnings progress for Indian corporations has been in single-digit percentages for 5 consecutive quarters, under the 15%–25% progress seen between 2020–21 and 2023–24.

Following the April-June earnings bulletins, ahead 12-month web earnings forecasts for cars and elements, capital items, meals and drinks, and shopper durables sectors noticed the deepest cuts in earnings estimates, every down about 1% or extra, the info confirmed.

The authorities’s plans to decrease consumption taxes are additionally anticipated to spice up the nation’s GDP progress. Economists at Standard Chartered pencil in a lift of 0.35-0.45 share factors within the fiscal 12 months ending in March 2027.

India’s actual GDP progress averaged 8.8% between fiscal 2022 and 2024, the best in Asia-Pacific. It is projected to develop at 6.8% yearly over the following three years.

Bank of America’s newest fund supervisor survey reveals that India has tumbled from the most-favoured to the least-preferred Asian fairness market in simply two months.

“After disappointing earnings growth of only 6% in 2024, the pace of recovery remains sluggish in 2025, as indicated by both the economic growth parameters and corporate earnings,” mentioned Rajat Agarwal, Asia fairness strategist at Societe Generale.