NewsStocksJPMorgan Expects India to Underperform Global Markets Despite Stable FY26 Earnings OutlookJPMorgan Expects India to Underperform Global Markets Despite Stable FY26 Earnings Outlook
JPMorgan's Sanjay Mookim reports that earnings downgrades in India have slowed significantly with FY26 expectations now stable, though FY27 estimates may still face cuts from 16% to 12-13%. Despite low double-digit rupee growth expected from large Indian companies, currency weakness will limit dollar-adjusted returns to mid-high single digits. The firm favors consumer discretionary over capex stocks due to fiscal constraints and limited government spending capacity, while warning that high equity supply from various sources could cap market upside in 2026.
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JPMorgan's Head of India Equity Research Sanjay Mookim has provided a measured outlook for Indian markets, noting that while earnings downgrades have eased significantly, the country is likely to underperform global markets in the near term. His assessment highlights both stabilizing domestic fundamentals and challenging relative positioning against international peers.
Earnings Outlook Shows Stabilization
Mookim observed that the pace of earnings downgrades in India has abated meaningfully, with market expectations for FY26 now appearing relatively stable. However, he cautioned that FY27 estimates may still face cuts, with current consensus growth expectations of around 16% likely to settle near 12-13%.
The more significant challenge, according to Mookim, lies in India's comparative performance against other markets. While large Indian companies may deliver low double-digit earnings growth in rupee terms, other regions including Asia and the US are experiencing higher growth rates.
Currency Impact on Dollar Returns
| Metric | Expectation |
|---|---|
| Rupee Terms Growth | Low double-digit |
| Dollar-Adjusted Growth | Mid to high single digit |
| FY27 Consensus Revision | From 16% to 12-13% |
After adjusting for currency weakness, India's dollar earnings growth could be limited to mid to high single digit over the next year, significantly impacting returns for international investors.
Sector Strategy Favors Consumer Discretionary
JPMorgan continues to prefer consumer discretionary stocks over capital goods and infrastructure names. Mookim cited improving consumer data and better demand trends in discretionary categories as key drivers for this positioning.
The firm expects limited support for capex stocks due to several fiscal constraints:
- Weak government revenues
- Anticipated tax cuts
- Limited room to raise fiscal deficit
- Reduced chances of fresh public capex push in upcoming budget
Market Headwinds from Supply Factors
Mookim warned that equity supply is likely to remain elevated in 2026 if markets stay stable, potentially capping near-term upside. Key supply sources include:
- Block deals
- Promoter sales
- New listings
This high supply environment could limit market performance even if fundamental conditions improve.
Global Comparison and Risk Factors
The JPMorgan analyst noted that economies such as the US and China are benefiting from fiscal support, creating stronger momentum elsewhere compared to India. He emphasized that "at least in the near term, momentum elsewhere is probably going to be stronger."
Regarding global risks, Mookim observed that markets have largely ignored geopolitical tensions and political uncertainty, focusing instead on earnings momentum. He suggested that a sharp sentiment shift would likely require a major shock, such as escalation in trade tensions or reversal in AI-led market optimism.
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