A larger share of smallcap companies failed to meet earnings expectations for the March 2025 quarter compared to their larger peers, with 31 percent of smallcaps missing estimates versus just 17 percent of largecaps, according to brokerage firm JM Financial. The earnings season, while offering some positive surprises at the index level, revealed deeper stress among smaller firms and select sectors, pushing analysts to revise earnings forecasts for the coming years.
JM Financial said 18 percent of the 50 Nifty companies under its coverage missed estimates in the fourth quarter of FY25, while 48 percent beat expectations and the rest reported in-line numbers. The brokerage pointed out that when broken down by market capitalisation, the extent of disappointment rose inversely with size — the smaller the company, the greater the deviation from expectations. Midcaps followed with 28 percent of companies missing their numbers.
Nifty50 Earnings Beat, But Sector Divergence Grows
Despite market concerns, the Nifty50 posted a 4.9 percent year-on-year growth in earnings per share (EPS) for Q4FY25, outperforming JM Financial’s earlier projection of a 2.2 percent decline. Excluding the financial sector, the index delivered a strong 10.5 percent YoY EPS growth compared to an expected fall of 0.8 percent.
However, the report noted that the performance was highly uneven across sectors. JM Financial highlighted that key verticals such as Financials (-1.8 percent YoY), Oil & Gas (-6.6 percent), IT (-3 percent), and Consumer (-9.3 percent) dragged on overall index performance. On the other hand, Metals & Mining recorded an impressive 33.2 percent YoY earnings growth, followed by Ports and Logistics at 23.3 percent, Industrials at 18 percent, and Infrastructure at 16.7 percent.
JM Financial stated that while index-level earnings were stronger than expected, the underlying sector performance continued to show stress in pockets — an indication of polarisation within corporate India.
FY26 and FY27 Earnings Estimates Cut
Reflecting the mixed trends and sectoral challenges, JM Financial revised its earnings projections for the Nifty50. The brokerage said it had cut its FY26 EPS estimate by 5.3 percent and FY27 EPS by 5.9 percent. As a result, Nifty EPS growth for FY26 now stands at 12 percent (down from 16.4 percent), while FY27 is forecast at 14.3 percent (versus 15.1 percent earlier).
JM Financial attributed the EPS downgrades primarily to weak showings in the Automobile, Cement, Oil & Gas, and NBFC sectors. These segments are now expected to remain earnings laggards in FY26.
Nonetheless, several sectors are projected to lead earnings recovery in FY26. According to JM Financial, Telecom is expected to clock 73 percent EPS growth, followed by Metals & Mining (23 percent), Oil & Gas (23 percent), Consumer (14 percent), and Banks (7 percent). Banks alone account for 37.7 percent of the Nifty’s profit pool, underscoring their critical role in index-level earnings.
Within JM Financial’s broader coverage universe, EPS rose 9.5 percent YoY in Q4FY25. EMS companies posted the strongest growth at 113 percent YoY, followed by Aviation (62 percent) and Healthcare (44 percent). On the weaker side, Building Materials saw a 28 percent decline in EPS, Depositories dropped 22 percent, and Auto Ancillaries declined 17 percent.
JM Financial said Internet companies delivered the largest positive surprises compared to estimates, followed by EMS and Utilities. However, Healthcare and Real Estate reported disappointing results, missing expectations by wide margins.
In conclusion, JM Financial’s analysis reveals a deeply segmented earnings landscape for the March 2025 quarter. While largecaps managed to deliver relatively resilient performances, smallcaps faced heightened earnings volatility, leading to a notable 31 percent miss rate. The overall Nifty50 outperformed expectations, but persistent sectoral stress prompted downward revisions in forward earnings estimates.
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