Nomura projects 11-12% earnings growth for Indian companies this fiscal year, but warns that crude oil prices rising above $100 per barrel could force earnings downgrades. The brokerage cautions that rising energy costs and geopolitical tension in West Asia threaten to compress corporate profit margins.
Nomura’s latest analysis highlights a potential conflict between India’s resilient corporate earnings and rising global macro risks. While the brokerage forecasts an 11-12% growth rate in earnings for Indian firms—excluding the oil and gas sector—for the current financial year, it warns that this trajectory is increasingly vulnerable to global energy prices and geopolitical instability in West Asia.
Historically, many Indian companies have absorbed moderate increases in crude oil prices by accepting lower profit margins or through government excise policy adjustments. However, the brokerage notes that this ability to buffer costs is reaching its limit. If crude oil prices sustain a spike to $100 or $110 per barrel, companies will face a difficult choice: either absorb the hit and report lower profits, or pass the higher costs to consumers. If they pass the costs on, it risks dampening consumer demand, which could subsequently lead to earnings downgrades across the market.
For Indian investors, the energy import bill is a critical factor. India is a major importer of crude oil, meaning higher prices can pressure the Indian Rupee and inflate logistics and raw material costs. Sectors such as paints, aviation, and fast-moving consumer goods (FMCG) are typically the most sensitive to these cost increases, as their margins rely heavily on crude-based inputs or fuel prices.
Nomura has set a Nifty 50 target of 25,900 for March 2027. While this implies a potential gain from current levels, the firm emphasizes that this outlook is conditional on market stability. The brokerage points out that current market fluctuations are driven not just by energy costs, but by a combination of global conflict and shifting corporate profitability.
With stock valuations currently at higher levels compared to historical averages, the market has little room for error. Investors should monitor quarterly results closely, specifically looking at margin trends and management commentary regarding input cost management. The ability of companies to protect their profitability while maintaining demand in a high-cost environment will be the most important factor for shareholders to track in the coming quarters.