India's Stock Market Faces Earnings Gloom, Threatens Economic Revival

Slowing Corporate Earnings Raise Concerns

A slowdown in corporate earnings is casting a shadow over India's $4.1 trillion stock market, potentially hindering Prime Minister Modi's economic recovery efforts.

Bank Forecasts Downgraded

Banks such as Citigroup and HSBC have cut profit forecasts after disappointing earnings from major Indian companies, including Adani Enterprises and Tata Motors. Local brokerage JM Financial predicts the benchmark NSE Nifty 50 Index to grow less than 5% this fiscal year, the slowest pace since the pandemic.

Challenging Global Backdrop

The global economic scenario complicates matters further. US President Trump's tariff policies and potential dollar strengthening add to uncertainties.

Tax Cuts May Not Be Enough

Despite a record $11.5 billion in tax cuts announced by the Modi government, analysts remain skeptical about their ability to offset headwinds and boost earnings.

Indian Economy Slowing

India's economic growth has slowed as a pandemic-era consumption surge has eased and inflation has risen. The government has lowered its growth projections to their weakest since the pandemic.

Disappointing Earnings for Big Companies

Data from 39 Nifty 50 companies indicates that 19 have missed earnings estimates. Tata Motors and Maruti Suzuki saw their shares decline after reporting subpar results.

Adani Enterprises Suffers Major Loss

Shares of Adani Enterprises plummeted after a 97% quarterly profit plunge due to a coal trading unit decline and foreign exchange loss.

Market Sell-Off Continues

The dismal earnings outlook has contributed to an ongoing market selloff that has erased over $600 billion from the MSCI India Index since September.

Foreign Funds Withdraw

Global funds have withdrawn over $20 billion during this sell-off, making it an extended period of net outflows.

Investment Slowdown Hurts Corporate Profits

Modi's focus on welfare projects after a parliamentary majority loss has slowed investment-driven growth, a key driver of the post-pandemic market surge.

Consumer Firms May Offer Support

Analysts expect tax cuts to boost consumer spending, which could support profitability.

Ongoing Demand Concerns

However, companies remain concerned about weak demand. Mentions of "slowdown" in earnings calls have reached their highest level since the pandemic.

Earnings Recovery Uncertain

While tax savings may stimulate spending, the extent of its impact on earnings growth remains unclear.