Analysts cut india profit outlook as us tariffs threaten growth

Analysts have made the biggest cuts to profit outlooks for Indian companies in Asia, pointing to higher U.S. tariffs as a threat to growth, even though planned tax relief at home may soften the hit.

LSEG IBES data show that 12-month forward earnings projections for India’s large- and mid-cap firms fell by 1.2% over the past two weeks, the largest decline in the region.

The downgrade comes after a muted quarter, as per Reuters, extending the slowdown that started last year and has dragged on key stock indexes.

Even though India’s demand is mostly domestic and Nifty 50 companies earn only 9% of their revenue from the U.S., tariff rates of up to 50% on exports to that market raise risks for the broader economy.

India’s corporate earnings growth stuck in single digit

MUFG estimates that keeping a 50% levy in place could shave 1 percentage point off India’s GDP growth over time, with labor-heavy sectors such as textiles taking the biggest blow.

To support spending at home, Prime Minister Narendra Modi has rolled out broad tax changes aimed at lifting consumption as trade tensions with Washington build.

“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 remain 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.

Corporate earnings in India have grown at single-digit rates for five straight quarters, well below the 15%-25% pace seen from 2020-21 through 2023-24.

Tax cuts may boost India’s GDP by up to 0.45%

After April–June results, analysts cut 12-month net income forecasts the most in automobiles and components, capital goods, food and beverages, and consumer durables, with each group lowered by about 1% or more, the data indicate.

Planned cuts to consumption taxes are also expected to help growth. Standard Chartered’s economists estimate the measures could add 0.35-0.45 percentage points to GDP in the fiscal year ending March 2027.

India’s real GDP growth averaged 8.8% in fiscal 2022 to 2024, the fastest in Asia-Pacific, and is expected to average 6.8% a year over the next three years.

Investor sentiment has turned as well. Bank of America’s latest fund manager survey shows India dropped from the most-favored 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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