 "India Inc")
Analysts have scaled back earnings growth expectations for 2025-26 (FY26) and 2026-27 (FY27) despite the fourth quarter (Q4FY25) earnings scorecard surprising on the upside. The Street expects Nifty earnings per share (EPS) to grow less than 9 per cent year-on-year (Y-o-Y) — down from 15 per cent six months ago — to ₹1,135. Meanwhile, the Nifty EPS for FY27 is expected to grow 15 per cent (down from 18 per cent earlier) Y-o-Y to ₹1,305.
In a note, Nomura said FY27 earnings growth could be further cut by 4-8 per cent. “The corporate earnings-to-GDP ratio is close to its peak, and significant outperformance to nominal GDP growth is unlikely in the near term, in our view. Potential earnings headwinds include weak investment cycle, fiscal consolidation by the government, reduced household financial savings, and weak export demand. These, to an extent, could be negated by lower oil prices, inflation, and interest rates,” said Saion Mukherjee, head of research, Nomura, in the note last week.
The lowering of growth numbers comes despite a surprise earnings beat in Q4. For instance, the 223 companies in Nomura coverage universe reported aggregate profit growth of 10 per cent Y-o-Y, beating consensus estimates of 4 per cent. Similarly, of the 297 companies under Motilal Oswal coverage, 122 exceeded profit estimates while 87 posted a miss, and 88 were in line. The brokerage has cut FY26 EPS growth by 2 per cent, “largely owing to SBI, ONGC, IndusInd Bank, Tata Motors, and TCS”.
Furthermore, it has also reduced FY27 EPS estimates by over 1 per cent due to “downgrades in SBI, ONGC, IndusInd Bank, TCS, and Reliance Industries”. A JM Financial note highlighted that 72 per cent of Nifty companies faced EPS cuts in May 2025, up from 70 per cent in April, with significant reductions in sectors like banks, IT services, consumer, automobiles, metals & mining, NBFCs, and oil & gas.
In a note, Elara said Q3FY25 earnings trend suggested a pivot toward investment-led momentum in FY26. “Banks, which led the previous cycle, currently appear to be peaking in incremental contribution. Earnings upgrades are increasingly centred on energy, metals, and industrials, with consumption and rural trends also strengthening. The baton is shifting — from defensives to domestic cyclicals — as leadership realigns in favour of policy-linked and manufacturing-oriented sectors,” said Elara strategists Bino Pathiparampil and Saharsh Kumar in the note.
Interestingly, despite FY26 and FY27 earnings downgrades, analysts remain optimistic about the Nifty’s outlook, raising target prices.
Nomura, for instance, revised its Nifty target to 26,140 from 24,970, applying a higher valuation multiple of 21x FY27 earnings, up from 19.5x, citing India’s stable macroeconomic environment, including low bond yields and consistent domestic investment flows.
The market has rebounded sharply from April lows, erasing year-to-date (YTD) losses to trade 5 per cent higher. Nifty now trades at 22x its FY26 earnings estimates — above its long-term average of 20.7x.
“Despite near-term volatility from global macro issues, trade tensions, and earnings concerns, India’s medium-to-long-term growth story remains solid,” said Motilal Oswal in its report.
