Eurozone Q4 GDP Growth Hits 1.3%: Resilience Amidst Cooling Economic Engines

Market snapshot: The Eurozone economy recorded a year-on-year growth rate of 1.3% for the fourth quarter, aligning perfectly with market expectations but marking a slight deceleration from the previous quarter's 1.4%. This data suggests that while the single-currency bloc is avoiding a hard landing, the momentum of post-inflationary recovery is beginning to plateau. For Indian markets, which maintain significant trade ties with the European Union, this stability offers a double-edged sword: predictable demand but limited upside for export growth in the near term.

Summary: Eurozone GDP grew by 1.3% YoY in Q4, meeting estimates but slowing from the 1.4% seen in Q3. This confirms a cooling trend in European demand.

Key Takeaways

• Q4 GDP at 1.3% YoY meets consensus, reducing immediate volatility in the EUR/INR pair.
• The 10bps dip from the previous 1.4% highlights persistent manufacturing sluggishness in core economies like Germany.
• Stability in Eurozone growth provides a neutral backdrop for Indian IT and Auto-component exporters.

SAHI Perspective

From a SAHI perspective, the meeting of estimates is a 'non-event' that actually serves as a 'relief event' for Indian equities. Since the data did not miss the 1.3% mark, fears of a deeper European recession are localized to specific industrial sub-sectors. We expect Indian IT majors, which derive nearly 25-30% of their revenue from Europe, to maintain their current guidance. However, the slowing YoY trend suggests that capital expenditure (Capex) from European BFSI clients might remain conservative through H1 2026.

Closing Insight

While the Eurozone is not in freefall, the era of easy growth is over. Investors should pivot toward Indian companies with domestic-heavy revenue models while maintaining 'Hold' positions on Euro-exposed cyclical stocks.

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