Bernstein fears Street not pricing in earnings miss, sees Nifty down to 23,500 by December

Bernstein noted that the earnings miss has been a secular trend, barring banks, IT and healthcare.

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26 Aug, 2025 12:21

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Bernstein in a recent note has cautioned about the second quarter earnings disappointment, suggesting that the stock market may not have fully priced in the extent of the economic and demand sluggishness. The report fears that there could be further moderation in the index level, and the Nifty 50 index may slip further down to 23,500 by the end of the year as it digests the miss on the earnings front.

Earnings Disappointment

The note highlights the red flag on earnings slowdown, first raised in May this year, and asks if it is fair to discount the performance of the first half and expect the second half of the fiscal to compensate?

Bernstein's note says that the earnings of nearly half of the companies that have reported results from the Nifty + Next 50 universe, saw an earnings miss greater than 4%, a figure highest since the Covid-19 battered quarter of March 2020. The earnings growth expectations have flattened to 0.6%, weighed down by a contraction seen in the numbers of the companies that have reported results so far.

Read More: December quarter earnings expected to be better than September quarter

This, Bernstein fears, could be emblematic to a more deeply ingrained slump, both in the macros as well as the micros. Missing levers like topline growth and margin expansion hint at a broader concern than what could be explained by monsoon and election-related disruptions, the note added. The extend of urban slowdown is unlikely to be completely offset by rural growth due to strong monsoons, Bernstein added. The note fears that most participants, ranging from policymakers to investors, have not fully realised the growth concerns, and are consider the slowing signs as an anomaly.

Read More: Why is urban demand slowing down?

Bernstein noted that companies have blamed the weak demand as a one-off phenomenon, and expect a Q3FY25 recovery. This promise of a more brighter future, the note said, has put significant burden on H2FY25.

Recently, Maruti Suzuki in its earnings call had pointed at the shrinking of the sub-Rs 10 lakh category, which seemed to be reeling under a serious lack of affordability. Bhargava noted that the market for cars under Rs 10 lakh is not only stagnating but also declining.

Index Call

Bernstein said it expects a 'further but limited moderation' in Nifty from present levels to around 23,500 — which is also its year-end target for the index. The note recommends a 'bottom-up play' in select sectors as a good investment strategy going forward, with 'significantly reduced' growth values compared to FY24.

In October, CLSA's technical analyst Laurence Balanco had adviced caution, saying that he sees further correction in Nifty 50, which could take the index to the long-term support level of 23,389 soon.

Sector Call

Bernstein noted that the earnings miss has been a secular trend, barring banks, IT and healthcare. Banks were supported by stronger performance by the heavywieghts, and IT shares have possibly seen the worst for the near term, it added. However, Automotive shares have been hurt by a subdued demand, and Staples are seeing some degree of urban slowdown in consumption. Utilities, Industrials and cement are witnessing low demand due to weak capex and monsoon.

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