Q2 earnings season may be a muted affair for India Inc amid weak demand

Banks are expected to be the biggest laggards during the quarter with most of them expected to report year-on-year decline in net profit and flat to negative growth in net interest income

Investors should brace for another quarter of muted revenue and earnings growth from India’s leading listed companies. Earnings estimates for the Nifty 50 companies, compiled by various equity agencies, suggest corporate revenue grew in single digits for a 10th consecutive quarter during July-September (Q2FY26). Net profit growth, too, was likely in single digits for a sixth straight quarter. 

Banks are expected to come out as the biggest laggards, with most of them likely to report year-on-year declines in net profit and flat to negative growth in net interest income.

 

Their performance would weigh on overall earnings, as banks account for nearly a third of total corporate profits. At the other end of the spectrum, telecom operators such as Bharti Airtel and Reliance Jio (consolidated with Reliance Industries) and steel producers, including Tata Steel and JSW, are expected to drive most of the incremental year-on-year growth in earnings in Q2FY26.

 

Consumer goods companies such as Hindustan Unilever, ITC and Asian Paints are expected to report further deceleration in revenue and earnings growth in the second quarter. IT services firms, including Tata Consultancy Services, Infosys and Wipro, are likely to post low single-digit growth in revenues and earnings, continuing the trend of the past eight quarters.

 

According to brokerage estimates, combined net sales (or net interest income for lenders) are expected to rise 7.4 per cent year-on-year in Q2FY26, an improvement from 4.9 per cent in Q2FY25 and 5.7 per cent in Q1FY26. For the 46 Nifty 50 companies in the sample, combined net sales are projected to reach ₹13.68 trillion in Q2FY26, up from ₹12.73 trillion a year ago, but below ₹15.2 trillion in Q1FY26.

 

Combined net profit is estimated to have grown 6.8 per cent year-on-year in Q2FY26, slowing from 9.8 per cent in Q1FY26, though an improvement from 4.4 per cent in Q2FY25. The 46 index companies are expected to report combined net profit of ₹1.94 trillion, up from ₹1.83 trillion a year ago, but down from ₹2.06 trillion in Q1FY26. This would make Q2FY26 the lowest earnings quarter in the past four.

 

Quarterly net profit for the index companies has remained in a narrow range of ₹1.8–2.1 trillion since Q3FY24 (December 2023 quarter). At this pace, Nifty 50 earnings growth should be in single digits for a fifth consecutive quarter, while net sales would have expanded in single digits for the ninth consecutive quarter, beginning Q1FY24 (June 2023 quarter).

 

There are no earnings estimates for four index companies -- Adani Enterprises, Jio Financial, SBI Life Insurance Company and HDFC Life Insurance Company. The analysis is based on average estimates for 46 Nifty 50 companies for Q2FY26, compiled from brokerages including Antique Stock Broking, Batlivala & Karani Securities, Dolat Capital Market, Elara Capital, Emkay Research, HDFC Securities, JM Financial, Kotak Institutional Equities, Motilal Oswal Financial Services, Nuvama Wealth Management, Systematrix and Yes Securities. Not all companies are covered by all brokerages.

 

“Our coverage universe reveals bright spots, with sectors such as cement, hotels and consumer durables likely to post strong top-line growth. Conversely, demand growth softened in automotive and retail ahead of new GST tax rates, while the IT sector is expected to witness a slowdown,” wrote analysts at Yes Securities in their Q2FY26 preview.

 

Analysts at Antique Securities expect Q2FY26 to be a trough quarter, “which is likely to be followed by strong growth in H2FY26 helped by multiple tailwinds”.

 

The banking, financial services and insurance (BFSI) sector is expected to be a major drag, with flat year-on-year net profits and 6.3 per cent year-on-year growth in net interest income -- the weakest performance for at least five years.

 

Excluding BFSI, Nifty 50 companies’ combined net profit is expected to have risen 10.3 per cent year-on-year, up from 9.1 per cent in Q1FY26. Non-BFSI companies’ combined net sales are forecast to have grown 7.5 per cent year-on-year, broadly in line with 7.4 per cent in Q1FY26.