Corporate earnings, which had shown signs of recovery in recent quarters, are now on the cusp of a shift, as brokerages flag that rising crude and gas prices amid geopolitical tensions may trigger a fresh cycle of earnings downgrades.
Brent crude oil prices have risen over 60% since the start of the West Asia conflict on 28 February, while the closure of the Strait of Hormuz has effectively disrupted gas inflows to India. The impact is already being felt across a majority of sectors, from paints, aviation, and FMCG to QSR, with analysts warning that it could compress margins in the near term.
Stock markets were among the first to react to the geopolitical tensions and were heavily impacted in March, as the 11.3% decline in the Nifty 50 marked its worst monthly performance in six years, reflecting deepening concerns over the economic impact.
Tensions persisted throughout March, prompting companies in sectors such as paints and automobiles to raise prices to offset rising input costs.
Brokerages flag earnings slowdown
Against this backdrop, domestic brokerage firm Motilal Oswal said the upcoming March quarter earnings will reflect the impact of the Strait of Hormuz crisis. This is also evident in its earnings revisions, as the trend of positive upgrades over the past two quarters reversed in March 2026.
The brokerage expects a softer 10% year-on-year growth in earnings for the MOFSL universe—the lowest in five quarters—compared with 18% and 15% growth recorded in Q3 and Q2 FY26, respectively.
It expects Nifty 50 earnings to grow 6% year on year in Q4 FY26. Excluding global commodities (metals and oil & gas), the MOFSL universe and Nifty are likely to report 9% and 5% year-on-year earnings growth, respectively, for the quarter.
Growth in the MOFSL large-cap universe’s profit after tax (PAT) is likely to slow the most, to 7% year-on-year, driven by sectors such as oil & gas, automobiles, PSU banks, healthcare, and capital goods.
Another domestic brokerage firm, JM Financial, said that 40% of Nifty companies saw cuts in FY27E EPS in March 2026, with automobiles, infrastructure & ports, pharmaceuticals, insurance, cement, and utilities being the key contributors.
Earlier, global brokerage firm, Goldman Sachs also downgraded its rating on Indian equities and slashed its target for the Nifty 50, as it expects earnings downgrade cycle to begin due to the sustained rise in energy prices.
It expects MSCI India earnings growth of 8% in CY26 and 13% in CY27, about 11 pp below consensus cumulatively over the next 2 years, mainly on account of higher oil prices, slower GDP growth and a weaker rupee.
Negative returns, rising cuts: Nifty earnings outlook weakens
According to JM Financial, over the last 12 months from March 2025 to March 2026, the Nifty 50 has delivered a return of -5.1%, while FY26E and FY27E EPS estimates have been cut by 7.2% to ₹1,205 and 5.1% to ₹1,385, respectively.
Motilal Oswal has reduced its FY26E, FY27E, and FY28E Nifty EPS estimates by 2.0%, 1.3%, and 1.3%, respectively, and now expects earnings to grow 5%, 18%, and 16% year on year to ₹1,060, ₹1,246, and ₹1,440, respectively, which are lower than JM Financials’ estimates.
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