India Inc’s earnings outlook for FY26 may be due for a reality check, as BNP Paribas has estimated that profit the growth for Nifty companies could come in at 10–11%, well below the 14% consensus, currently projected as per Bloomberg data.
“We always start with high expectations and then revise lower,” said Kunal Vora, Head of India Equity Research at BNP Paribas, in an exclusive interview with N Mahalakshmi on The Wealth Formula podcast.
“FY25 has already disappointed, and FY26 is likely to follow a similar pattern, albeit with some improvement,” said Kunal Vora.
The Nifty's earnings growth for FY25 was downgraded from an initial double-digit forecast to about 6-7% by the year-end, following weaker-than-expected performances across sectors. Consumption was particularly sluggish, with FY25 shaping up to be 'probably the worst in 20 years' for consumer staples, Vora said. Revenue growth in the sector hovered in the low single digits, and median EBITDA growth was around just one percent.
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IT services also underperformed, defying hopes of a recovery, while financials posted mixed results, with expectations being trimmed steadily. “Overall, FY25 has not played out very well,” Vora said.
Yet, some green shoots are visible. Cooling crude prices, a likely rate-cutting cycle, and signs of recovery in consumption suggest a better macro backdrop. Still, Vora sees earnings estimates being dialled down as the year progresses.
He pegs his FY26 earnings growth forecast at 10-11%, factoring in real GDP growth of around 6.5% and nominal growth of roughly 9%. “Earnings typically grow slightly ahead of nominal GDP, so that’s how we arrive at our estimate,” he said.
The current Bloomberg consensus of 14% earnings growth for FY26 reflects early optimism and may not account fully for sector-level challenges. In particular, IT services remain under pressure, with cautious management commentary and continuing demand uncertainty. “The outlook may improve if the US moves into a rate-cut cycle and global trade normalises, but we are not there yet,” Vora added.
On the flip side, some sectors are sounding more optimistic. Rural consumption indicators are improving, and management commentary in consumer staples has turned more hopeful, with companies projecting a return to high single-digit revenue growth, and easing margin pressure. Read More
In financials, Vora expects a split year where earnings could face pressure in the first half if interest rates fall further, but a recovery is likely in the second half, with FY27 shaping up to be a stronger year for the sector.
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