Equity market analysts have cautioned over a likely subdued earnings growth for FY26 after a mixed fourth quarter of corporate results, citing weak forward earnings. Many experts are fearing that earnings downgrades may now surpass upgrades during this financial year.
Several leading broking firms have already cut earnings estimates for this year. “FY26E EPS has been trimmed by 2%. Consumers, autos and industrials faced earnings cuts while earnings stabilised for commodity companies,” Nuvama said in a recent note.
“FY26 numbers continued to report significant downgrades with earnings cut of 3% for BSE 500. In fact, over the course of last year, the FY26 EPS has been cut by 10% for BSE 500 and even a larger quantum for Small and Midcaps. This pace of earnings cuts is worrying and needs to be monitored going ahead… The Nifty is forecast to deliver mid-teen earnings growth over the next two years. Given that demand headwinds are persisting, we think this is a tall ask,” Nuvama added. Read More
This is significant, as several market participants believed that given the dearth of positive triggers to drive the markets higher, earnings was being seen as an important factor to support a revival.
“The 4QFY25 earnings fared better than expectations; however, forward earnings revisions continue to exhibit weakness, with downgrades surpassing upgrades… we foresee downside risks to our earnings estimates for FY26E/27E,” Motilal Oswal Financial Services said in a note.
“Our MOFSL Universe witnessed a cut of 2.2% for FY26… Further, our midcap and smallcap universes experienced a bigger cut at 3.8% each in FY26E. The largecap universe witnessed a cut of 1.8%,” MOFSL added.
Read More: Nilesh Shah flags high mid-small cap valuations, sees 11–13% FY26 earnings growth
In a similar context, another leading broking firm JM Financial has also cut its FY26e and even FY27e estimates, even as it said Q4FY25 Nifty50 EPS had grown by 4.9 percent, which was better than the expected 2.2 percent decline seen a year ago.
Read More: India Inc’s FY26 earnings forecast likely to see cuts, says BNP Paribas' Kunal Vora
“Through 4QFY25 results, our Nifty50 EPS for FY26E and FY27E have been cut by 5.3% and 5.9% respectively. Consequently, our Nifty50 EPS growth now stands at 12.0% (vs. 16.4% earlier) for FY26E and 14.3% (vs. 15.1% earlier) for FY27E. Of these, the largest EPS cuts for FY26E are in Automobiles, Cement, Oil & Gas, and NBFCs,” JM Financial said.
Kotak Institutional Equities in its latest strategy note said that the Indian market seems to be stuck between the harsh realities of stiff valuations, domestic growth issues and global macroeconomic headwinds, with the hope of a recovery in economy and earnings.
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