Nifty50 earnings revision indicator slips back into negative territory: NSE

The Earnings Revision Indicator (ERI), which measures the breadth of analyst sentiment by calculating the proportion of index constituents receiving upward EPS revisions minus those receiving downward revisions, has slipped back into negative territory, according to the Nifty Corporate Performance Review report.

 

A positive ERI signals that upgrades outnumber downgrades, while a negative reading indicates the reverse. The indicator is therefore a compact gauge of the direction of revisions across Nifty 50 companies. Importantly, ERI captures breadth rather than magnitude. Aggregate earnings can still rise even when the ERI is negative if the quantum of upgrades outweighs downgrades. In that sense, the indicator reflects the distribution of revisions rather than their depth.

 

 

“After remaining firmly in negative territory through much of last year and into June 2025, the ERI improved gradually, though it has softened again in recent months. Following a brief return to positive readings, the indicator slipped back into contraction territory this year, suggesting that downgrades once again exceed upgrades, albeit less sharply than during the early part of last year,” said the exchange in its report.  

(Source: NSE)

 

The partial recovery over the past six months aligns with broader stabilisation in earnings revisions. "However, elevated geopolitical tensions, along with domestic and external demand headwinds, continue to weigh on the durability of a sustained earnings upcycle," said the report.

Q3FY26 earnings review

According to the report, Nifty 50 net sales excluding Tata Motors rose 12.5 per cent Y-o-Y in Q3FY26, an 11-quarter high, with sequential growth of 6.8 per cent Q-o-Q. The expansion was supported by festive demand, GST adjustments, robust credit offtake, and stronger realisations in materials and energy sectors.

 

The broader Nifty 500 also delivered revenue growth of 11.1 per cent Y-o-Y, with mid- and small-cap companies posting double-digit expansion and improved breadth.

 

Operating performance remained healthy, though margins faced pressure from higher input and wage costs. Nifty 50 non-financial Ebitda grew 11.3 per cent Y-o-Y, slower than in Q2, while Nifty 500 excluding Nifty 50 Ebitda rose 16.5 per cent Y-o-Y, led predominantly by energy. Margins improved on a Y-o-Y basis despite sequential cost pressures.

 

Profit growth strengthened across cohorts. Nifty 50 aggregate PAT increased 12.8 per cent Y-o-Y and 10.6 per cent Q-o-Q, with materials, financials, and consumer discretionary sectors driving gains. Margins edged up to 12.5 per cent.

 

Beyond the top 50, PAT rose 24.5 per cent Y-o-Y, led by energy and financials. Mid- and small-cap firms delivered strong earnings performance, reflected in the declining contribution of Nifty 50 to Nifty 500 earnings.

 

For 9MFY26, Nifty 50 revenues grew 8.8 per cent Y-o-Y to a three-year high, while Nifty 500 excluding Nifty 50 revenues rose 7.4 per cent Y-o-Y, indicating steady year-to-date momentum.

 

Nifty 50 adjusted PAT rose 12.3 per cent Y-o-Y, with margins at a multi-year high of 12.6 per cent. Beyond the top 50, PAT expanded 21.8 per cent Y-o-Y, with margins rising to 8.9 per cent, underscoring sustained profitability momentum.

 

“Improved profitability in Q3FY26, amid strong credit offtake, higher realisations and firmer post-GST demand, has resulted in a stabilising earnings revision cycle. Consensus earnings forecasts (LSEG Workspace) for FY26 for the top 200 well-covered companies were marginally trimmed by 0.1 per cent since end-December, while FY27 forecasts were upgraded by 0.7 per cent, driven by materials and financials,” the report said.

 

As of February 27, 2026, projected earnings growth stands at 12 per cent for FY26 and 15.7 per cent for FY27, with the implied FY25–27 CAGR rising to 13.9 per cent, indicating a strengthening medium-term trajectory despite near-term sectoral pressures.

 

“Consistent with these trends, the ERI has also slipped briefly into the contraction zone, suggesting that downgrades again exceed upgrades, albeit less sharply than during the early part of 2025. Complementing this, our HHI-based concentration analysis across the Nifty 50, Nifty 500 and Nifty 500 ex-Nifty 50 universes indicates a nuanced shift in Q3,” said the exchange in its report.

 

Concentration moderated within the Nifty 50, pointing to a more even distribution of revenue and profit growth among large caps, while earnings concentration edged higher in the broader market, led by energy and financials. Overall concentration for the Nifty 500 remained broadly stable, reflecting offsetting trends between the top 50 and the rest of the universe, even as medium-term trends continue to show structurally greater dispersion beyond the top 50.

 

“Looking ahead, the domestic macro backdrop remains supportive of earnings, though elevated geopolitical uncertainty, tariff risks and commodity volatility pose potential downside pressures,” the report added.