Mumbai:As 36 companies from India’s Nifty 50 index reported their earnings for the June quarter—mostly in line with expectations—analysts on Sunday shared a mixed outlook for earnings forecasts for FY26.
US-based investment firm Jefferies noted that Q1 results overall beat expectations. On the other hand, Kotak Securities pointed to ongoing challenges in consumption demand, muted growth in IT services, and sluggish loan growth in the banking sector.
The companies reporting so far span across sectors like financial services, insurance, FMCG, capital goods, IT, pharmaceuticals, and oil & gas. Their combined profit came in at ₹1.44 lakh crore, slightly above the anticipated ₹1.43 lakh crore.
Jefferies said its earnings downgrade ratio has improved sequentially. About 50% of tracked companies saw earnings downgrades—lower than the 57% average seen in the last three quarters. While still high, this marks a marginal improvement in sentiment.
Banking was a key driver of downgrades. Large private sector banks delivered mixed results, with some facing asset quality issues and pressure on net interest margins. Consequently, earnings estimates for these banks were trimmed by 1–9%. In contrast, NBFCs posted stronger growth in assets under management and profits, though consumer demand commentary remained weak.
Kotak Securities remains cautious on the IT sector, citing ongoing struggles with revenue growth and margin pressure due to weak discretionary spending. IT firms also flagged macroeconomic uncertainties, delayed client decision-making, and lower technology investments. However, Jefferies has upgraded its view on the IT sector from ‘underweight’ to ‘neutral’, expecting a short-term rebound.
The Nifty IT index dropped 9.4% in July—its second-largest fall in 2025—driven by underwhelming earnings, global tech headwinds, and the disruptive impact of AI-related restructuring. Notably, TCS recently announced it will lay off 12,200 mid- and senior-level employees.
Despite persistent concerns over single-digit EPS growth, Jefferies believes the IT sector may soon see a tactical recovery, thanks to attractive valuations and strong free cash flow support.
While Kotak Securities foresees further earnings estimate cuts across sectors, Jefferies expects improvement in the upcoming September-quarter results, aided by a lower base and the early onset of the festive season.
With inputs from IANS