What to expect from Indian stock market as Trump’s tariff pause deadline ends this week? Geojit’s Vinod Nair explains
The market has entered Q1 with high expectations. These hopes were largely influenced by the stronger-than-anticipated Q4 performance, which prompted a modest upward revision in earnings estimates.
Initially, Q4 was approached with subdued sentiment, as India’s broad earnings growth outlook projected at sub 5% YoY. However, the actual growth came in significantly higher at around 10–12%, leading to marginal improvement in FY26 forecasts. Consequently, the market now expects FY26 to be in a range of 10 to 13%, compared to sub 5% of FY25.
Q1 is anticipated to gather momentum, driven by a domestic economic recovery. India’s GDP rose from 5.6% in Q2 and 6.4% in Q3 to 7.5% in Q4 FY25. Lately, the 6.5% FY25 GDP growth forecast has been increased to 6.6 to 6.8% as a consensus.
Government spending has risen after the dull period of CY24. With a good monsoon, relaxation in inflation, expansion in the manufacturing sector, and anticipation of a trade deal with the U.S., the market has a decent outlook on future growth.
Although overall expectations are high, Q1 earnings are likely to begin on a subdued note due to muted expectations in the IT sector. This is because of low IT spending in the US. Large IT stocks carry a muted expectation on FY26 with revenue estimates in a range of sub 5%, while midcap holds a better growth view due to deals and improvement in margin due to cost control measures.
Also, the environment is expected to improve gradually in the U.S. due to the passage of the finance bill with tax cut measures, which is expected to boost the outlook for the US IT sector and improve spending due to tax savings. Also, the FED board consensus is improving about future interest rate cuts due to the slowdown in U.S. economy, the huge spread between EU and US bank rates, moderation in future inflation, and anticipation of a trade deal reducing tariff uncertainties.
Consequently, despite a muted outlook for IT stocks, performance is expected to remain resilient with limited downside risk.
Even as the market rallies to 25,500, concerns remain that the projected 10–13% earnings growth may not fully satisfy expectations. This places significant importance on Q1 results, which must be strong and indicate further upside potential with reflection of a reduction in both domestic and global risks.
Beyond earnings, qualitative factors such as the resolution of trade war uncertainties through the finalization of a long-term agreement must also add confidence in the business outlook. Such quantitative elements can only further charge the trend of the stock market during the year, since the market is trading at a 3-year high valuation forward P/E of 21x. However, volatility may increase as the market nears 9th July, the end of the 90-day pause on reciprocal tariffs unless clarity emerges.
The author, Vinod Nair, is Head of Research at Geojit Financial Services.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making investment decisions.
