Nifty 50 EPS grew just 4.7% in March quarter, slowest pace since 2017

This is likely to be the first time since the break-out of the pandemic in March 2020, that the index EPS may not grow on a sequential basis

A slowdown in corporate earnings in recent quarters has started showing in underlying earnings per share (EPS) and valuation ratios of benchmark equity indices such as the Nifty 50.

 

The index underlying EPS is up just 4.7 per cent year-on-year (Y-o-Y) during the earnings seasons so far, growing at the slowest pace since 2017, barring the period of Covid in 2020, when it had shrunk due to the pandemic and its impact. 

The index ended with an EPS of ₹1,071.4 on Tuesday, up from ₹1,023 at the end of May last year and ₹1,066 at the end of December last year. 

The pandemic had resulted in a decline of 12.2 per cent in the Nifty 50 EPS in calendar year 2020. (See the adjoining chart.)

This is likely to be the first time since the outbreak of the pandemic in March 2020 that the index EPS may not grow on a sequential basis. 

The current index EPS of ₹1,071.4 is marginally lower than ₹1,071.7 at the end of February this year, which marked the end of the Q3FY25 earnings season. 

  In comparison, the index EPS had grown in double digits for 21 consecutive months between August 2023 and April this year.

The current pace of Nifty EPS growth marks a sharp deceleration in corporate earnings from its typical pace in the post pandemic period.

 

The Nifty 50 underlying EPS has grown at an annualised rate of 21.1 per cent in the last 51 months beginning March 2021. As a result, it more than doubled during the period, growing from ₹503 at the end of March 2021 to ₹1,071 now.

 

The index EPS tracks the combined net profits of 50 listed companies that are part of the index on a trailing 12-month basis.

 

It is calculated by dividing the index’s “end of the day” value with its reported “price-to-earnings” multiple for the day.

 

The Nifty 50 ended Tuesday’s trading session with a trailing price-to-earnings multiple of 22.94 and a closing index value of 24,578.35 according to the data from Bloomberg.

 

The index EPS trajectory is likely to change a bit by the end of this month because only 33 of the 50 index companies have reported their quarterly results for Q4FY25 till the end of May 12, 2025. 

 

The combined net profits of these 33 index companies were up 4.7 per cent Y-o-Y to ₹1.6 trillion in Q4FY25, growing at the slowest pace in at least the last 17 quarters. These index companies’ combined net sales (gross interest income in the case of lenders) were up 8.3 per cent Y-o-Y to ₹12.3 trillion in Q4FY25, growing at the slowest pace in at least the last 17 quarters.

 

Analysts and brokerages, however, remain pessimistic about corporate earnings. 

 

“Corporate earnings continue to disappoint and downgrades exceed upgrades even in the Q4FY25 earnings season. At this rate, the overall earnings of Nifty 50 companies are likely to grow by only around 5 per cent in FY25,” said Dhananjay Sinha, co-head, research and equity strategy, Systematix Institutional Equity.

 

He expects the Nifty 50 underlying EPS to increase at a compound annual growth rate (CAGR) of 5-6 per cent over the next two years.

 

Analysts at Motilal Oswal Securities have cut the Nifty 50 forward earnings estimate for FY26, expecting a softness in corporate earnings.

 

“We estimate Nifty 50 companies’ earnings to grow by 2 per cent Y-o-Y in 4QFY25. We cut our FY25E/FY26E Nifty EPS by 2.9 per cent/3.8 per cent and expect it to grow to ₹1,017 and ₹1,157 respectively,” wrote analysts at Motilal Oswal Financial Services in their earnings preview for Q4FY25.

 

A slowdown in index EPS growth and a strong rebound in stock prices have led to a sharp rise in index valuation. The Nifty 50 trailing price-to-earnings (P/E) multiple is now up 11 per cent from its post-pandemic low of 20.6 at the end of February this year. The index current P/E multiple is now at its highest level in the last eight months, hinting at investors’ optimism of a faster recovery in corporate earnings.