MUMBAI: Thanks to the war in West Asia and the ensuing oil price shock that the Indian economy is currently facing, top foreign brokers and analysts have cut India Inc’s earnings estimates as well as Nifty targets by nearly 12%.
They also warned that if the war continues for a long time and oil prices rise to all-time highs, the impact on the economy and market could be severe.Major foreign brokerage Goldman Sachs lowered its Nifty target to 25,900 points from 29,300 points earlier, while Citigroup revised its target for the index to 27,000 points from 28,500 points earlier. For its part, HSBC said that the historical trend shows that a 20% rise in oil prices could lead to a decrease in the Indian company’s profits by 1.3 percentage points.
Since the start of the war, crude oil prices have risen by about 50-55%.
Vehicles double Rs
Goldman Sachs downgraded India to ‘market weight’ from ‘overweight’ on a less attractive risk-reward matrix compared to some other Asian markets, amid a deteriorating macro economy and slowing earnings growth, a note from the financial services major said. Analysts expect Indian companies to show earnings growth of 8% in 2026 and 13% in 2027. “We see risks tilted to the downside in the next three to six months, as we believe the market may not factor in the full scope of earnings cuts.
(Potential) bullish catalysts include an earlier than expected resumption of oil flows and a clear recovery in India’s earnings cycle.Data show that a 10% supply-driven rise in oil prices led to a roughly 1.3% decline in the broader Indian stock index, with consumer discretionary, technology and financial services more at risk, HSBC said in its report. “The risks are exacerbated by currency weakness: a 1% rupee depreciation tends to translate into an additional 1% market decline.
These relationships are largely consistent with recent performance: the price of oil has risen by about 55% since the outbreak of the conflict, while the value (of the rupee) has depreciated by about 3.5%, implying an overall market impact of about 11%.
“The BNP Paribas report said: “A 10% increase in oil prices leads to an increase of about 35 basis points in the current account deficit.” He also noted that as the war continues, remittances from West Asia may slow, further impacting the Canadian dollar.