Earnings downgrades loom for Indian corporates as oil stays above USD 100

Earning will drop: Analysts are beginning to cut FY 2027 earnings growth forecasts for major Indian companies as crude oil prices remain elevated above USD 100 / bbl. The surge in energy costs is not yet fully reflected in estimates and is expected to weigh on corporate performance over the coming quarters.

Before the conflict, projections hovered around 10-12% earnings growth — an outlook that is now in question. A prolonged disruption could pull growth down to the 6-10% range, with some earnings estimates for companies listed on Nifty already revised to as low as 8% — down from a previous 15% — should oil prices continue to remain elevated, Business Standard reports, citing Elara Capital.

Broad-based decline: The pressure is expected to be broad-based, affecting consumption, margins, and operations. Automobiles, oil and gas, aviation, and consumer goods are set to face direct cost pressures, while the finance sector could see second-order effects from slower demand.

Oil and currency are key variables: Crude prices remain volatile depending on the headlines coming out of the Strait of Hormuz. The INR-USD trajectory is critical, with export-driven sectors like IT and pharma partly cushioned by currency weakness. While a quick resolution could limit the impact to a single quarter, sustained disruption may lead to deeper earnings downgrades.

Why it matters: A sustained slowdown in India’s earnings trajectory has direct implications for Gulf capital, particularly given the multi-bn USD exposure of sovereign wealth funds like the Public Investment Fund, the Abu Dhabi Investment Authority, and Mubadala across Indian retail, infrastructure, and digital assets. A meaningful moderation in earnings growth would affect their returns on these long-duration investments in India, prompting a reassessment of capital allocation.