Indian companies have seen the steepest earnings downgrades in Asia, with analysts slashing forecasts as steep U.S. tariffs heighten risks to growth even if proposed domestic tax cuts help cushion the impact.
According to LSEG IBES data, forward 12-month earnings estimates for India’s large and mid-cap firms have been cut by 1.2% in the past two weeks, the sharpest in Asia.
The cuts follow a lacklustre season of quarterly earnings reports extending a bout of weakness among listed firms which kicked off last year and has hurt benchmark equity indexes.
India’s economy is largely domestic and firms which are part of the Nifty 50 index earn only 9% of revenue from the U.S. but the tariff hike to as high as 50% on exports to the world’s largest economy presents a risk to economic growth.
Analysis by MUFG indicates that a sustained 50% tariff could cut India’s GDP growth by 1 percentage point over time, with the biggest hit to employment-sensitive sectors such as textiles.
Looking to buoy domestic consumption, Indian Prime Minister Narendra Modi recently announced sweeping tax reforms to boost the economy in the face of a trade conflict with Washington.
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“It’s a little bit of an interesting time given what’s happened with the tariffs that have been imposed on India,” said Raisah Rasid, global market strategist at J.P. Morgan Asset Management.
Valuations are still 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 said.
Earnings growth for Indian companies has been in single-digit percentages for five consecutive quarters, below the 15%–25% growth seen between 2020–21 and 2023–24.
Following the April-June earnings announcements, forward 12-month net income forecasts for automobiles and components, capital goods, food and beverages, and consumer durables sectors saw the deepest cuts in earnings estimates, each down about 1% or more, the data showed.
The government’s plans to lower consumption taxes are also expected to boost the country’s GDP growth. Economists at Standard Chartered pencil in a boost of 0.35-0.45 percentage points in the fiscal year ending in March 2027.
India’s real GDP growth averaged 8.8% between fiscal 2022 and 2024, the highest in Asia-Pacific. It is projected to grow at 6.8% annually over the next three years.
Bank of America’s latest fund manager survey shows that India has tumbled from the most-favoured to the least-preferred Asian equity market in just 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,” said Rajat Agarwal, Asia equity strategist at Societe Generale.
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