Commodity costs, geopolitical tensions threaten to derail India Inc.’s Q2 earnings momentum: Brokerages
Brokerage reports suggest that Indian companies may face a slowdown in earnings growth for the second quarter of fiscal 2027 due to rising commodity costs and geopolitical instability. Analysts warn that the buffers that protected Q1 profits are fading, while inflation and potential supply chain disruptions in the Middle East pose further risks.
Why it matters
The potential earnings downgrade for Indian firms reflects broader concerns about how global macroeconomic pressures and regional conflicts impact emerging market growth.
Indian listed companies may struggle to replicate their strong first-quarter (Q1) earnings performance in the second quarter of fiscal 2027 as elevated commodity prices, pricing pressures and heightened macroeconomic risks weigh on their bottom lines, according to brokerage reports.
Companies delivered a strong performance in Q1, with more than 70% either meeting or exceeding analysts’ earnings estimates, according to HSBC Equity Research. Aggregate earnings rose 16% year-on-year (YoY) during the quarter.
Cautioning that the earnings momentum could weaken in the coming quarters, HSBC said “there’s a risk of downgrades in coming quarters as commodity prices stay elevated, while the lift from GST (Goods and Services Tax) cuts and inventory gains fade,” the brokerage said. The impact of further price increases on (consumer) demand remains another key risk.
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