IndusInd Bank, Axis Bank, DRL and Tata Steel drove Nifty earnings downgrades in July

Stocks such as IndusInd Bank, Axis Bank, Dr Reddy's Laboratories, Tata Steel and HDFC Life led Nifty downgrades in the month of July, which coincided with the first quarter earnings season. ONGC, Bharat Electronics (BEL), Reliance Industries (RIL), Mahindra & Mahindra and Shriram Finance are some of the Nifty constituents that led the earnings upgrades for the month.

In the past one year, Nifty has delivered a flat return, while FY26 and FY27 EPS have seen cuts of 9 per cent and 7 per cent, respectively. In July, EPS estimates for both FY26 and FY27 saw a MoM decrease of 0.5 per cent, JM Financial said. 

"Further, the number of Nifty companies that saw an EPS cut decreased from 44 per cent in June to 40 per cent in July, with banks, IT services, consumer, auto, pharma, NBFCs and insurance being key contributors. Stocks that saw the biggest EPS cuts include IndusInd Bank, Axis Bank, Dr Reddy’s Lab, Tata Steel, and HDFC Life, while stocks that saw the largest upgrades include ONGC, Bharat Electronics, Reliance Industries, M&M, and Shriram Finance," JM Financial said.   

Among Nifty stocks, IndusInd witnessed 13.4 per cent earnings downgrade in July. Axis Bank, another private lender, saw 7.5 per cent earnings downgrade. DRL saw 6.3 per cent downgrade, followed by Tata Steel (5.4 per cent) and HDFC Life (4.2 per cent). 

Kotak said the FY2026E and FY27 EPS of Nifty-50 index has seen further cuts over the past one month, reflecting the weakening growth outlook, with FY26 Nifty-50 seeing 2 per cent EPS cut in the past one month. 

"As such, we currently expect 10 per cent/17 per cent growth in net profits of the Nifty-50 Index in FY2026E/27E. We note that quality of earnings of the Nifty-50 Index for FY2026 remains poor, with construction materials and metals & mining companies in aggregate contributing 32% and 25% of the incremental net profits of the Nifty-50 Index and KIE universe in FY2026. We note a similar trend in consensus earnings estimates for the Nifty-50 Index companies," it said.

MOFSL said EPS for Nifty is expected to rise to 10 per cent in FY26 against a sluggish 1 per cent in FY25, aided by a likely improvement in the macro environment owing to stimulative fiscal and monetary measures. 

"Markets have staged an impressive recovery from the April’25 lows. Although July was somewhat weak, we believe better earnings prospects and reasonable valuations (barring small-cap) should help the market eke out gains," MOFSL said.