Adani, Tata Profit Misses Add to Alarm Over India Stocks Outlook

(Bloomberg) — A deepening slowdown in corporate earnings is fueling fresh concern over India’s $4.1 trillion stock market, and threatening to undermine Prime Minister Narendra Modi’s latest efforts to revive growth.

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Citigroup Inc. and HSBC Holdings Plc are among banks that have cut profit forecasts as the latest earnings from some of India’s top firms, including Adani Enterprises Ltd. and Tata Motors Ltd., trailed estimates. Local brokerage JM Financial Ltd. expects the benchmark NSE Nifty 50 Index’s earnings to grow less than 5% this fiscal year, the slowest pace since the pandemic. Some strategists say even that forecast may be too optimistic.

To make matters worse, the global backdrop is becoming more challenging as US President Donald Trump’s tariff policies spur uncertainty and raise the odds of further dollar strengthening. Some strategists are skeptical that the record $11.5 billion in tax cuts announced by Modi’s government last week will be enough to counter these headwinds and help earnings recover.

“There is room for downward revisions as we don’t think there is going to be a V-shaped recovery in earnings,” Rajat Agarwal, an Asia strategist at Societe Generale Pvt., said by phone. “Tax cuts are not a big positive for the earnings recovery, as consumption has a lower multiplier effect on the economy than capex.”

At the heart of the issue is India’s economic slowdown. The global growth champion is stumbling after a pandemic-era consumption boom slowed and inflation spiked. The government has lowered its growth projection for the fiscal year to the weakest since the pandemic.

JM Financial expects profits for the three months ended December to be up just 4.4% year-on-year, making it a third straight quarter of single-digit growth. Out of the 39 Nifty 50 companies that have posted results so far, earnings for 19 have missed estimates, data compiled by Bloomberg show.

And markets are punishing weak results. Tata Motors, the Indian parent of luxury sport utility vehicles Jaguar Land Rover, saw its shares plunge more than 7% after it reported a 22% drop in net income, missing expectations. Maruti Suzuki India Ltd., the biggest carmaker, also saw its stock drop after profit missed estimates, hurt by higher input costs mainly due to the rupee’s slide against the US dollar.

Shares of Adani Enterprises, the flagship firm of the ports-to-power Adani conglomerate, dropped more than 5% intraday on Jan. 30 after it reported a 97% plunge in quarterly profit, weighed down by its coal trading unit and a foreign-exchange loss.

The dismal earnings picture comes at a difficult time for Indian stocks, which are struggling to find catalysts to stem a selloff that has erased over $600 billion from the market value of companies on the MSCI India Index since a peak in late September.

Global funds have pulled more $20 billion on a net basis during this period. They were sellers for 22 straight days through on Feb. 3, making it a record streak for daily withdrawals in data compiled by Bloomberg.

India’s equity downturn comes after a yearslong rally that saw the Nifty 50 gauge cap a ninth straight annual gain in 2024, making the market a favorite among global investors.

The momentum faltered after Modi’s party shifted its focus toward welfare projects after an unexpected loss of its parliamentary majority in June. The pivot has slowed investment-driven growth, the key driver behind the market’s over 200% surge since the pandemic, and put pressure on corporate profits.

There are expectations that as the positive impact of tax cuts flows through the economy, consumer firms — which account for about 18% of the main index — will support profitability. JM Financial estimates that Nifty 50 earnings can rebound to 18% in the next fiscal year, driven by greater urban spending, recovery in rural demand and the ongoing expenditure on infrastructure.

For now though, corporates remain concerned about weak demand. Mentions of the word “slowdown” in earnings calls of companies in the Nifty 500 — the broadest gauge in India — hit the highest level since the pandemic, according to data compiled by Bloomberg.

“Consumption is returning as key investment theme but it would be too early to say it alone can revive earnings growth,” said Mohit Khanna, a fund manager at Purnartha Investment Advisers Pvt. While the tax savings may spur spending “it is a little difficult to assess what would be the quantum of earnings growth,” he said.

Adani, Tata Profit Misses Add to Alarm Over India Stocks Outlook

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