Jefferies’ Greed & Fear Report: US Tariffs to Hit India’s GDP and Earnings Growth
According to the latest Jefferies’ Greed & Fear report, if the US maintains its tariff rate unchanged at 50%, India’s GDP will likely be impacted by 1–1.2% and corporate earnings will also be affected, said Christopher Wood.
Impact on Indian GDP and Corporate Earnings
Wood and his team acknowledged that while a 50% tariff does not pose any direct impact on Indian corporates, it has blackened the outlook for small and micro enterprises in employment-heavy sectors if sustained for a longer time.
The higher tariffs also have a clear potential to negatively impact microfinance and consumer finance companies. ‘The longer the tariffs are in place, the more the negative consequences will show up,’ Wood said.
Resilience of Indian Stock Markets
Despite the grim backdrop, India’s stock markets have not reacted negatively of late, Wood said in the Greed & Fear note. Consumption-related stocks were specifically insulated from the external threat due to the policy response from the government.
Jefferies’ Greed & Fear team heard from officials in New Delhi that the plan to rationalize the Goods and Services Tax (GST) structure was long due, but the process just accelerated as the US imposed a 50% tariff on Indian imports.
GST Cuts and Their Impact
GST cuts are proven to be self-financing as they will generate more sales. The impact on the fiscal position of the central government is minimal, Christopher Wood said in the Greed & Fear report.
As tax cuts announced in the budget for fiscal 2026 are only going to boost the purchasing power of 3 crore Indians, the GST cuts will boost the disposable income of more people, the report said.
Nominal GDP Growth and Earnings
India recorded its lowest nominal GDP growth in the March quarter in the last two decades, Jefferies said. It decelerated to 8.5–9% from 10%. The reason behind this was a nominal slowdown in headline inflation and Wholesale Price Index.
The impact of GST cuts will be deflationary, and the recent monetary and fiscal easing are likely going to lift the nominal GDP growth from next fiscal year. Earnings’ growth will also pick up.
Jefferies has forecasted that MSCI India earning-per-share growth will increase from 10% in fiscal 2026 to 16% in fiscal 2027, after slowing from 18% in fiscal 2024.
Investment Strategies for Indian Investors
Given the current economic scenario, it is essential for Indian investors to remain cautious and diversified in their investment strategies. Diversification is key to minimizing risk and maximizing returns.
Investors can consider investing in consumption-related stocks that are less affected by external factors. Additionally, GST cuts and tax cuts can boost the purchasing power of individuals, leading to increased demand for certain products and services.
Conclusion
In conclusion, the Jefferies’ Greed & Fear report highlights the potential impact of US tariffs on India’s GDP and corporate earnings. However, the resilience of Indian stock markets and the government’s policy response have helped to mitigate the negative effects.
Indian investors must remain vigilant and adapt their investment strategies to the changing economic landscape. By staying informed and diversified, investors can navigate the challenges and opportunities presented by the current market conditions.