India sees Asia’s biggest earnings downgrades as US tariffs loom

New Delhi: Indian companies have seen the steepest earnings downgrades in Asia, with analysts slashing forecasts as steep US tariffs heighten risks to growth even if proposed domestic tax cuts help cushion the impact, Reuters reported.

According to LSEG, IBES data, forward 12-month earnings estimates for India’s large and mid-cap firms have been cut by 1.2 per cent 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 per cent of revenue from the US but the tariff hike to as high as 50 per cent on exports to the world’s largest economy presents a risk to economic growth.

Analysis by MUFG indicates that a sustained 50 per cent 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.

“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 per cent–25 per cent 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 per cent or more, the data showed.

The government’s proposed consumption tax cuts could lift GDP growth, with Standard Chartered economists projecting a 0.35–0.45 percentage point boost by FY27.