The recent fall in the domestic equity market echoes the slowdown in earnings growth of India Inc. Hence, all eyes are on the forthcoming Q4 financial results, which may set the tone for market sentiment. In the ongoing financial year, the benchmark NSE Nifty 50 index has dropped by 14% from its 52-week high as of March 17, 2025, while the broader Nifty 500 index has fallen by 17% during the same period.
There are expectations that corporate performance will continue along a similar trajectory, with profit and revenue growth remaining limited. G. Chokkalingam, Founder, Equinomics Research, says, “Nifty earnings may grow in the range of 8%-10% in Q4 on the back of relatively better performance from the banking and telecom companies.”
Aggregate profit after tax (PAT) growth of Nifty 50 firms reached a three-quarter high of 9.5% YoY for the quarter ended December 2024, reversing the slowing growth trend of the previous two quarters (0.8% in Q2FY25 and 3.5% YoY in Q1FY25), as per NSE’s Corporate Performance Review report.
On the other hand, revenue growth slowed in Q3FY25, hitting a 16-quarter low of 4.5% YoY for the Nifty 50. Despite slower top-line growth, EBITDA (up 10.5% YoY) and PAT improved in Q3FY25, thanks to easing input costs. Consequently, PAT growth for the first nine months of FY25 stood at 4.6% YoY, reaching Rs 6.3 lakh crore.
Market watcher Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS, says, “The forthcoming result season should see stability, while Q1FY26 should start seeing improvements in earnings growth as the base softens. Thus, the earnings trajectory will start looking much better from the June quarter onwards.”
He adds that the Maha Kumbh, held during the March quarter, is likely to add to GDP growth by increasing consumption.
Another market watcher, Trideep Bhattacharya, President & CIO-Equities, Edelweiss MF anticipates strong Q4 earnings growth from NBFCs and companies in hospitals space, driven by resilient demand and improved margins. Conversely, consumer staples may face near-term pressure due to sluggish volume growth.
When asked which sectors may deliver superior earnings in Q4, Ajit Mishra, SVP, Research, Religare Broking, says, “Sectors like consumer goods, private banks, insurance, telecom, pharma, and cement are expected to deliver annual earnings growth of 10%-15%, supported by stable demand and efficient cost management.
He adds that the banking sector is expected to benefit from liquidity easing, which should support credit growth after it declined to below 11% in Q3FY25 from 16% during the same period last year.
On the other hand, Mishra says cyclical sectors like autos, industrials, and metals may struggle, with quarterly earnings growth as low as 2-4%. Their profit margins could shrink by 2-3 percentage points due to prolonged weakness in domestic consumption and several quarters of sub-10% top-line growth.
Puneet Singhania, Director of financial services provider Master Trust Group, adds that India’s IT sector remains an attractive investment. “Uncertainty in the sector still persists, particularly due to tariff threats, but Q4 results could provide a sign of recovery,” he says.
Meanwhile, market watchers also think global macroeconomic factors will play a crucial role. Fed rate decisions impact global capital flows and borrowing costs-an accommodative US policy could lower financing expenses and support profit margins, while a tighter stance may weigh on earnings growth.
“Uncertainty around tariffs, particularly in US-India trade negotiations, could slow private capital expenditures, which have only shown modest improvement. These external challenges, coupled with domestic conditions, indicate potential headwinds for Q4 earnings,” says Mishra.
If Q4 earnings disappoint D-Street, investor confidence could drop further, leading to more selling. “Even a slight improvement might ease concerns, but without strong results, the market may face further pressure,” says Singhania.
Analysts also believe earnings improvements could take shape in the coming quarters, supported by multiple factors. Strengthening GDP growth is likely to drive higher consumer demand, boosting sales and profitability.
Singhania explains earnings are set to improve as the full effects of the current slow growth are absorbed, likely in the upcoming fiscal cycle. Several factors could drive this turnaround.
“If government policies succeed in boosting disposable incomes, we could see a rise in consumer spending, which would help companies report better results. Additionally, a favourable monsoon could stimulate growth in agriculture and related sectors, while an increase in government capital spending might benefit infrastructure and industrial companies,” he says.
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