Q1 earnings review: The June 2025 quarter earnings season for Nifty 50 companies has so far delivered a largely in-line performance, with the majority of results reflecting broader economic and sectoral trends.
As of now, 36 of the 50 Nifty constituents have reported their results, covering a wide range of sectors including BFSI, IT, oil & gas, FMCG, capital goods, pharma, and insurance. Despite some mixed outcomes, brokerages say the current earnings cycle appears to be stabilising after a period of downgrades and volatility.
The earnings growth in the first quarter of FY26 was powered by key sectors such as BFSI (4% YoY), Technology (7%), Oil & Gas (7%), Cement (47%), and Utilities (13%). These five sectors alone accounted for nearly 71 per cent of the total incremental YoY growth in Nifty earnings. The cement sector saw the sharpest surge in profits, aided by price hikes and operating leverage. Meanwhile, the oil & gas sector benefited from stable crude prices during the quarter.
Q1 FY26 Review — Downgrades Ease But Persist
Jefferies said the June-quarter earnings season has turned out to be better than expected, with the downgrade ratio improving sequentially. While 50 per cent of companies in its coverage still saw earnings downgrades, this is an improvement compared to the average 57 per cent over the last three quarters.
Jefferies flagged that the bulk of earnings cuts were concentrated in the banking sector, particularly among larger private lenders, due to concerns over asset quality and net interest margin (NIM) compression. In contrast, NBFCs reported stronger asset growth and profitability, although management commentary remained cautious on consumption demand.
Motilal Oswal Financial Services (MOFS) also reported that earnings for 38 Nifty firms grew 7.5 per cent YoY, ahead of their estimate of 5.7 per cent.
“The 1QFY26 earnings have broadly been in line, with the intensity of earnings cuts moderating compared to the previous quarters, albeit the trend of a higher number of downgrades persists into the quarter. EPS growth for Nifty50 is projected to rise to ~10% in FY26 (vs. an anaemic 1% in FY25) – aided by a likely improvement in the macro environment owing to the stimulative fiscal and monetary measures,” MOSL said.
Gains were led by RIL, HDFC Bank, ICICI Bank, JSW Steel, Bajaj Finance, L&T, and M&M, which together contributed 100 per cent of the incremental earnings growth. On the other hand, Coal India, IndusInd Bank, HCL Tech, Kotak Mahindra Bank, Axis Bank, and Eicher Motors weighed on the index.
Despite this relative stability, MOFS trimmed Nifty EPS estimates for FY26 by 1.1 per cent to ₹1,110 and FY27 estimates by 0.8 per cent to ₹1,297, citing cuts in earnings expectations for Reliance Industries, Axis Bank, Power Grid Corp, HDFC Bank, and Kotak Mahindra Bank.
Market Outlook and Strategy
According to MOFS, Nifty50 earnings are now expected to grow 10 per cent in FY26, following a muted 1 per cent growth in FY25. This improvement is expected to be supported by a more favourable macro environment, aided by stimulative monetary and fiscal policies.
Valuation-wise, the Nifty trades at 22.1x FY26E earnings, slightly above its long-period average (LPA) of 20.7x. MOFS also noted that while their portfolio still tilts toward large caps (70 per cent), they have turned more constructive on mid-caps, increasing their weight to 22 per cent from 16 per cent earlier. This change is based on better-than-expected earnings from the mid-cap universe and improved visibility going forward.
In terms of sectoral allocation, MOFS remains overweight (OW) on BFSI, Consumer Discretionary, Industrials, Healthcare, and Telecom, while being underweight (UW) on Oil & Gas, Cement, Real Estate, and Metals. They also expect limited impact of US trade tariffs on Indian markets, suggesting external shocks may not derail the current momentum.
Meanwhile, Jefferies has added Infosys to its model portfolio, replacing BPCL and Welspun, citing attractive valuations in the IT sector, despite muted EPS growth projections. “Much like the recent bounce in FMCG, IT stocks may now see a tactical recovery,” said the brokerage.
“While we remain concerned about the long-term stock performance of IT companies given the single-digit EPS growth outlook, we believe conditions are ripe for a near-term tactical bounce, supported by attractive valuations relative to the Nifty, free cash flow, and under-ownership,” said Jefferies. “This should be similar to the recent bounce seen in the FMCG sector.”
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
