The geopolitical turmoil following the war in West Asia is beginning to show up in the books of Indian corporates. Input costs have gone up for most companies which, in turn, has compressed margins and could end up slowing the earnings growth in the coming quarters.
With fuel prices remaining elevated and supply chains fragile and heavily impacted due to the conflict, corporate earnings could take a significant hit, potentially declining by 10-15% in the financial year 2027 (FY27), according to economists and analysts.
Adding to the worries, emerging demand-side challenges may weigh on growth, potentially leading companies, particularly in oil-dependent sectors, to postpone their capital expenditure plans.
While the impact on earnings will largely be limited in the March quarter results — which are expected from the second week of April — margins are likely to get significantly squeezed, especially for smaller companies, and earnings are expected to take a hit in the upcoming June quarter and FY27.
Further, if retail inflation rises, the Reserve Bank of India is likely to raise interest rates which could affect the demand in the system. Airlines, textiles, paints, fertilisers and restaurants are among the sectors that are expected to be the worst hit due to the situation.
This estimate factors in the conflict in West Asia not lasting for an extended period, with most experts expecting it to be resolved within the next 2-3 months due to the sheer number of countries involved.
“Given the pain that this conflict is causing to so many economies, we do not expect it to persist beyond a few months. So, there will be measures taken to de-escalate,” said Gaura Sengupta, chief economist at IDFC FIRST Bank.
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The State Bank of India (SBI) Research estimates that prolonged tensions could place Rs 13.75 lakh crore of corporate sector revenue in 18 segments at risk. In a severe scenario, revenue losses may reach Rs 2.75 lakh crore which is equivalent to 0.8% of GDP.
The revenue loss is likely to be Rs 1.38 lakh crore (0.40% of GDP) in a mild scenario and Rs 69,000 crore (0.20% of GDP) in the case of a baseline scenario, it said.
Given that West Asia furnishes approximately 60% of India’s crude oil imports alongside a significant proportion of its LNG requirements, the impact is permeating across industries that collectively underpin nearly 40% of the revenues of listed enterprises.
Most experts expect the biggest hit to earnings in the first quarter of FY27.
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According to Miren Lodha, senior director at Crisil Intelligence, corporate margins may fall by around 50-100 basis points for fiscal 2027 if the conflict is resolved sooner, but may take a hit of another 100 bps if the conflict is prolonged. Narendra Solanki, head of fundamental research at Anand Rahi Shares and Stock Brokers, also expects a downward revision of around 10% for FY27 earnings.
With trade tariff tensions impacting profits, private non-financial companies’ net profits grew at a slower pace of 5.2% in the quarter ended December 2025, compared to a growth of 11.8% in the year-ago period, RBI data showed. In Q2 FY26, net profits of these companies expanded by 1.5%. The data also showed that private non-financial companies clocked a double-digit sales growth of 10.1% in Q3 FY26, following eleven quarters of single-digit growth.
“As a rule of thumb, what happens typically is that any $10 movement in oil (crude prices) impacts the Nifty (50) earnings sensitivity by anywhere between 1.2-1.5%,” said Sumit Bhatnagar, equity fund manager at LIC Mutual Fund Asset Management.
Recently, Goldman Sachs lowered its earnings forecast for Indian companies by 9 percentage points cumulatively for the next couple of financial years. However, many also feel it is premature to revise earnings estimates for the entire FY27 due to the volatile nature of the war.
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The impact will be much more limited to a few sectors in the March quarter, such as food and hotels, as the conflict in West Asia started in late February, and most companies have enough inventories to run operations for 3-4 weeks.
However, all estimates are based on different scenarios and expectations, with the volatile situation in West Asia making it difficult to predict anything for certain. Most estimates referred to here consider crude prices remaining in the $80-120/bbl range and the conflict getting resolved sooner rather than later. However, if the conflict is prolonged, the impact would be much more severe, with it being very difficult to put a number on it, the experts said.
Vinay Pai, MD & Head of Fixed Income, Equirus Group, said domestic growth drivers are facing headwinds.
Export momentum may soften amid global trade disruptions, while elevated input costs could weigh on corporate margins and tax collections, which were budgeted on 7% GDP growth assumption.
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At the same time, rising fertiliser and input costs may necessitate higher government support for agriculture and MSMEs, increasing subsidy pressures, he said.
Most sectors will face the brunt of the West Asia conflict in some way or another, either due to the high crude prices or due to supply chain disruptions caused by the blockade of the Strait of Hormuz.
The primary transmission channel is energy. Crude prices have surged, pushing up costs for oil marketing companies (OMCs) such as IOC, BPCL and HPCL. Airlines, oil refiners, paints, fertilisers and restaurants are the sectors that are expected to be the worst hit due to the situation.
