Investors in Indian equities, particularly export-driven information technology companies, will be wary as worries deepen about their main market after US President Donald Trump’s inaugural address that was full of populistic nationalism such as “America first”, to roll back globalisation and look inward.

Software services exporters Tata Consultancy Services, Infosys Ltd and Wipro get a bulk of their revenue from the US, where big manufacturing companies, banks, insurance, entertainment, health and even governments outsource jobs to reduce costs and to stay competitive. If Trump, who rode to the world’s most powerful office as a fire-breathing votary of protectionist policy, lives up to his election rhetoric it could impact the outlook for these companies.

“Trump will keep everyone on their toes,” said equity strategist V. Venugopal. “He’s swayed by nationalistic fervour. If he tightens the screws on global trade and cash flows, that would jeopardise many economies and markets.”

Technology stocks had been on the retreat for much of 2016, reflecting tough market conditions in a world economy that struggled with Brexit in Europe and China’s slowdown. Trump’s unexpected victory in US presidential elections last November only added to the gloom.

Shares in Tata Consultancy Services, the top software services exporter, are down 3.15 per cent this month, adding to 3.2 per cent drop in 2016. Infosys, the second-largest in the sector, fell 7.8 per cent last year and is further down 6.1 per cent in January. Wipro and HCL Tech are marginally up after sliding 14.7 and 3.8 per cent respectively in 2016. Tech Mahindra has shed another 4 per cent after losing 5.7 per cent last year.

Earlier this week, the US Labour Department sued software giant Oracle Corp, accusing the Redwood Shores, California-headquartered company for discriminatory hiring practices against Whites, Hispanics and African-Americans in favour of Asians, particularly “Asian Indians”.

“I would expect to see a rise in the number of lawsuits which are then further amplified by a populist press,” Peter Bendor-Samuel, CEO of IT consultancy firm Everest Group, told the Economic Times newspaper. Rising protectionism in both the US and the UK fosters an environment that encourages lawsuits. He also sees “increased scrutiny” from US regulators creating more friction.

Eyes on budget

There will be little cheer for investors until the government unveils the annual budget on February 1 after disappointing results from private-sector Axis Bank and jitters as Trump takes over combined to pull stocks down over the week to Friday.

Due in the coming days are more corporate earnings, which are widely expected to be muted — even depressing — as New Delhi’s shock decision in early November to scrap high-denomination bank notes caused a severe cash crunch, dented consumer spending and took the wind out of the sail of a bubbling economy.

The International Monetary Fund slashed its growth outlook for India to 6.6 per cent in the current financial year to end-March, from 7.6 per cent projected earlier, citing the blow to the cash-dependent economy from the government’s drive against tax dodgers and counterfeiters It also lowered the forecast for 2017-18 by four percentage points to 7.2 per cent.

“The budget comes at a defining moment for this administration,” said one senior executive at a foreign fund, who did not want to be identified because of the sensitive issue. “The government bungled with the nuts-and-bolts of the demonetisation push, it was least prepared for the fallout, the hardships it caused to the people.”

“The jury is still out on the outcome,” he said. “Unless the budget breaks down shackles, cuts taxes and help bolster confidence among companies to jump-start investment, it would be difficult for growth to pick up.”

Axis Bank

The top-30 Sensex and 50-share Nifty, both closely tracked by fund managers, shed around 0.7 per cent in their first weekly decline in four. Shares in Axis Bank, the country’s third-largest private-sector lender, plummeted 6.9 per cent on Friday after quarterly profit dived more than 70 per cent due to steep increase in provisioning for bad loans.

“Axis Bank provided glimpses of what it means managing a large balance sheet through demonetisation with asset quality risks — weak loan growth, spread compression and higher provisioning led to lower profits,” brokerage Jefferies said.

Net profit tumbled to Rs5.80 billion for the three months ended December 31, well off market expectation of Rs7.8 billion — and down nearly three-quarters from Rs21.75 billion a year earlier — as provisions, including for bad loans, surged more than five times from a year earlier to Rs37.96 billion.

Gross bad loans as a percentage of total loans climbed to 5.22 per cent from 4.17 per cent in the previous quarter, and compared with 1.68 per cent a year ago.

Brokerage CLSA said the bank’s initiative to improve non-performing loan coverage ratio was encouraging and it expected earnings to normalise after declining in 2016-17. It lowered earnings estimates by 14-18 per cent for 2017-2019, citing higher credit costs, but maintained an “outperform” rating on the stock with a target price of Rs550. The share closed at Rs450.50 on Friday.

Bigger rival HDFC Bank, which has consistently fared better than its peers, is due to release its quarterly earnings on Tuesday.

Smaller lenders reported strong numbers Yes Bank, a favourite of foreign funds, posted a forecast-beating 31 per cent rise in earnings, while Federal Bank’s profit rose 26 per cent and Lakshmi Vilas Bank’s soared about 70 per cent.

Securities house JM Financial prefers private-sector banks over state-run lenders, while it is cautious on the sector. “Agility in the face of rapid changes in the landscape, as traditional moats are besieged, is needed for survival,” it said in a report, adding that nimble-footed private banks were much ahead of government-controlled lenders

Its top picks included HDFC Bank, IndusInd Bank, Yes Bank and ICICI Bank.

Big earnings awaited

Maruti Suzuki, which makes every second new car in India, reports its December quarter results on Wednesday. The company is expected to top the sector’s growth but the cash crunch triggered by the invalidation of Rs1,000 and Rs500 notes, which together constituted 86 per cent of the total currency in circulation, had affected sales of automobiles.

Consumer goods leader Hindustan Unilever, which releases its earnings on Monday, is also seen impacted by the drop in consumer spending. Diversified ITC Ltd, with interests in tobacco, fast-moving consumer goods, hotels, agri-business, paperboards and information technology, announces results on Friday.

Leading mobile services operator Bharti Airtel is scheduled to disclose its numbers on Tuesday, a day after smaller rival Idea Cellular. Bharti Infratel, the telecoms tower arm that was spun off by Bharti Airtel, releases earnings on Monday.

ICICI Prudential Life Insurance Co, the first company in the sector to be listed, reports earnings on Tuesday. CLSA believes the company has benefited from inflows during demonetisation, which pushed up annualised new premium growth to 64 per cent over November-December. The brokerage expects growth to moderate but said the company should benefit from a rise in share of financial savings over physical assets and increasing attractiveness of unit-linked insurance policies.

It reiterated ICICI Prudential as one of its top picks in the financial sector, and raised its target price to Rs415 from Rs360, with a “buy” rating. The share closed at Rs358.55 on Friday.

Other major results due are: Asian Paints, L&T Infotech, EIH Ltd, Power Finance Corp and Zee Media Corp on Monday; HCL Technologies, IDBI Bank, L&T Finance Holdings, TVS Motor Co and Zee Entertainment Enterprises on Tuesday; Ashok Leyland, Kotak Mahindra Bank, IDFC Bank and Wipro on Wednesday; JustDial on Friday and Larsen & Toubro Ltd on Saturday.

The writer is a journalist based in India.