India's Economic Growth Faces Downside Risks Amid Middle East Conflict
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 10 hours ago
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Should l Buy NMR?
Source: CNBC
- Growth Forecast Downgrade: India's growth forecast for the fiscal year ending March 2027 has been adjusted down to 7.0%-7.4% due to rising energy costs and supply chain disruptions linked to the Iran war, which is expected to significantly increase the trade deficit and impact the current account deficit, potentially hindering economic recovery.
- Rising Energy Costs: India relies on the Strait of Hormuz for about 50% of its crude oil, with prices surging from $80 to $140, leading to increased domestic fuel prices; while the government has cut taxes to alleviate consumer burdens, tax revenues are likely to be adversely affected.
- Private Sector Activity Slowdown: The HSBC flash Purchasing Managers' Index indicates that private sector activity in India fell to its lowest level since October 2022 in March, reflecting weak domestic demand and heightened inflationary pressures, with businesses expressing pessimism about future growth.
- Policy Response Measures: The Indian government has implemented measures to reduce central excise duties on petrol and diesel to prevent price hikes while raising export duties on diesel and aviation fuel to ensure domestic supply, demonstrating a cautious approach in addressing the energy crisis.
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Analyst Views on NMR
About NMR
Nomura Holdings Inc is a Japan-based company mainly engaged in the securities, investment, and other financial services business across the world. The Company has three business segments. The Sales segment provides investment consultation services to individual clients in Japan. The Investment Management segment provides investment management services and investment solutions, including the establishment and management of investment trusts, discretionary investment services for domestic and foreign investors, fund management and administration for investment corporations and institutional investors, and silent partnership management. The Wholesale segment is engaged in the sale and trading of bonds, equity securities, derivatives, and foreign exchange, as well as investment banking services such as the bonds and securities underwriting business, merger and acquisition (M&A) business and financial advisory services. The Company operates in Japan, the Americas, Europe, Asia and Oceania.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
India's Economic Growth Faces Downside Risks Amid Middle East Conflict
- Growth Forecast Downgrade: India's growth forecast for the fiscal year ending March 2027 has been adjusted down to 7.0%-7.4% due to rising energy costs and supply chain disruptions linked to the Iran war, which is expected to significantly increase the trade deficit and impact the current account deficit, potentially hindering economic recovery.
- Rising Energy Costs: India relies on the Strait of Hormuz for about 50% of its crude oil, with prices surging from $80 to $140, leading to increased domestic fuel prices; while the government has cut taxes to alleviate consumer burdens, tax revenues are likely to be adversely affected.
- Private Sector Activity Slowdown: The HSBC flash Purchasing Managers' Index indicates that private sector activity in India fell to its lowest level since October 2022 in March, reflecting weak domestic demand and heightened inflationary pressures, with businesses expressing pessimism about future growth.
- Policy Response Measures: The Indian government has implemented measures to reduce central excise duties on petrol and diesel to prevent price hikes while raising export duties on diesel and aviation fuel to ensure domestic supply, demonstrating a cautious approach in addressing the energy crisis.
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India's Economic Growth Faces Downside Risks Amid Middle East Conflict
- Growth Forecast Downgrade: India's growth forecast for the fiscal year ending March 2027 has been adjusted down to 7.0%-7.4% due to rising energy costs and supply chain disruptions linked to the Iran war, which is expected to significantly increase the trade deficit and impact the current account deficit, potentially hindering economic recovery.
- Rising Energy Costs: India relies on the Strait of Hormuz for about 50% of its crude oil, with prices surging from $80 to $140, leading to increased domestic fuel prices; while the government has cut taxes to alleviate consumer burdens, tax revenues are likely to be adversely affected.
- Private Sector Activity Slowdown: The HSBC flash Purchasing Managers' Index indicates that private sector activity in India fell to its lowest level since October 2022 in March, reflecting weak domestic demand and heightened inflationary pressures, with businesses expressing pessimism about future growth.
- Policy Response Measures: The Indian government has implemented measures to reduce central excise duties on petrol and diesel to prevent price hikes while raising export duties on diesel and aviation fuel to ensure domestic supply, demonstrating a cautious approach in addressing the energy crisis.
See More
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- Investment Appeal: Japan is becoming an attractive destination for investment due to improving business conditions.
- Focus on Profits: Companies are increasingly prioritizing profits and returning cash to shareholders through dividends and buybacks.
- Impact of Currency: A weaker yen is contributing to enhanced earnings for exporters.
- Overall Economic Outlook: The combination of these factors is creating a more favorable environment for investors in Japan.
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- Market Volatility Impacting IPOs: The ongoing Middle East conflict has weakened investor sentiment, leading to a more than 12% drop in Indian benchmark indices since January, prompting companies like PhonePe to halt their listing plans and reflecting a sharp decline in demand for new stocks.
- Foreign Capital Withdrawal Intensifies: Foreign institutional investors have sold over $8 billion worth of equities this month, draining liquidity and making it difficult for IPOs to secure attractive valuations, resulting in several tech and consumer startups postponing their listings and further exacerbating market uncertainty.
- Significant Slowdown in IPO Activity: Since the outbreak of the Iran war on February 28, IPO activity has noticeably slowed; despite India having topped global charts with 367 IPOs in 2025, 8 out of 11 IPOs listed this year are trading below their issue price, indicating a lack of investor confidence.
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- Lack of Earnings Forecast: Nomura Holdings refrained from providing earnings forecasts for the year ending March 31, 2026, due to uncertainties in global capital markets, which may affect investor confidence regarding the company's future profitability.
- Market Reaction: Despite the strong performance in the Japanese market making Nomura's stock appear cheaper, the uncertainty surrounding future earnings could lead to cautious investor sentiment, potentially impacting stock price volatility.
- Investor Engagement: At the Nomura Investment Forum 2025, the company showcased its strategic direction while supporting a crypto firm applying for a U.S. banking license, indicating an active positioning in emerging markets that could provide new growth opportunities.
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Laser Digital Seeks U.S. National Bank Trust Charter
- Trust Charter Application: Laser Digital has filed for a national bank trust charter with the OCC, aiming to streamline its operations in the U.S.; if approved, it will eliminate the need for separate custody authorizations in each state, enhancing operational efficiency.
- Regulatory Environment Shift: Following President Trump's return to office, federal regulators have eased rules for fintechs and digital asset firms, encouraging innovation and lending, with Laser Digital's application reflecting this trend.
- Competitive Landscape: By applying for a U.S. banking license, Laser Digital joins a growing list of fintechs, including Affirm Holdings, which applied last week, indicating a strong market demand for banking licenses among digital asset firms.
- Business Expansion Plans: While Laser Digital will not accept direct deposits, it plans to offer spot crypto trading, which could provide new revenue streams and support future business growth.
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