 "US economy likely to slow sharply amid trade tariff hikes, says Nomura")
The sharp trade tariff hike will be inflationary for the US economy and could drag it to “quite close to recession”, Nomura said on Thursday, while the brokerage also trimmed India’s FY26 economic growth forecast to 5.8 per cent.
According to Robert Subbaraman, head of global macro research of Nomura, the higher prices will reduce consumer demand, even as a high level of uncertainty is causing businesses to slow down their investment.
“The US growth is going to slow quite sharply, close to recession. Our forecast does not show a recession at this point, but it’s quite close to a recession. So for the full year, we have growth of 1.4 per cent for the US. Before April 2, our forecast was 2 per cent. So we have lowered it,” said Subbaraman.
Subbaraman added that the Federal Reserve will not be in a hurry to cut rates because it will wait until it’s clear that the worst of inflation is over. And perhaps the US central bank will only cut rates by December.
The brokerage said it pegs India’s gross domestic product (GDP) to grow at 5.8 by the end of the financial year 2025-2026 (FY26), taking into account the direct and indirect impact of the trade tariffs.
“We are in line with the consensus view that inflation is not a challenge, so expecting it to stay around 4 per cent this year,” said Sonal Varma, managing director and chief economics of Nomura.
But the brokerage said it expects a cyclical slowdown in the near term due to factors independent of trade tariffs and other global headwinds.
“We’ve had household balance sheet stress. We’ve had real incomes lower, especially on the urban side. The private capex cycle has been struggling, which is why even before Trump tariffs came in, we were, in fact, below consensus on our GDP growth projection. We had 6 per cent for FY26, which we have reduced to 5.8 per cent,” said Aurodeep Nandi, India Economist and executive director of Nomura.
Nomura expects Nifty to give low single-digit returns from the current levels. The brokerage has set a target of 24,970 for the Nifty by March 2026, which is close to 3 per cent gains from Thursday’s close of 24,247.
“We have a range on the lower side, around 21,800 to 25,600. The higher end of the range also has somewhat mid-single-digit returns,” said Saion Mukherjee, managing director and head of India equity research of Nomura.