JPMorgan: India Earnings Stable, But Market May Lag Global Peers

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AuthorIshaan Verma|Published at:
JPMorgan: India Earnings Stable, But Market May Lag Global Peers
Overview

JPMorgan's Sanjay Mookim reports a slowdown in Indian earnings downgrades for FY26, suggesting stable near-term expectations. However, he forecasts India will lag global markets, particularly the US and China, due to stronger foreign growth and fiscal support elsewhere. JPMorgan favors consumer discretionary stocks over capital goods, citing fiscal constraints limiting public capex. Equity supply remains a potential cap.

Earnings Outlook Stabilizes, Growth Concerns Remain

While Indian corporate earnings downgrades have significantly eased for the fiscal year 2025-26, according to JPMorgan's Head of India Equity Research, Sanjay Mookim, the nation's stock market faces a period of potential underperformance relative to global peers. Mookim indicated that although FY26 estimates are holding steady, projections for FY27 could still face downward revisions, with consensus growth possibly tempering from 16% to around 12-13%.

Global Growth Outpaces India

The core concern for investors lies in relative growth rates. Mookim noted that while large Indian companies might achieve low double-digit earnings growth in rupee terms, economies such as the US and China are experiencing higher growth, bolstered by fiscal support. Consequently, India's dollar earnings growth is projected to be in the mid-to-high single digits over the next year, especially after adjusting for currency fluctuations.

Sector Strategy: Consumer Over Capex

JPMorgan's sector strategy continues to favor consumer discretionary stocks, moving away from capital goods and infrastructure names. Mookim cited limited room for a fresh public capital expenditure push in the upcoming budget, attributing this to weak government revenues, potential tax cuts, and fiscal deficit constraints. He believes public policy is unlikely to provide a significant turnaround for capex stocks, contrasting this with improving consumer data and demand trends in discretionary categories.

Supply Headwinds and Geopolitical Risks

Investors should brace for elevated equity supply in 2026. Mookim warned that block deals, promoter sales, and new listings are likely to remain substantial if market conditions stay stable, potentially capping near-term upside. On the global front, Mookim observed that markets have largely overlooked geopolitical tensions and political uncertainty, prioritizing earnings momentum. A significant sentiment shift would likely require a major shock, such as escalating trade disputes or a reversal of AI-driven market optimism.

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