India Inc’s Q4 earnings are much better than estimated, according to Vinod Nair, Head of Research, Geojit Investments. In an interaction with Business Today, the market watcher said the broad market has done well with profit after tax (PAT) growth of 12% YoY. Companies within the Nifty50 index posted earnings growth of 6-7%, surpassing the forecast of 0-3%. This is estimated to marginally upgrade the India EPS forecast for FY25 and FY26. He also believes that price-sensitive sectors could hold the upper hand in FY26 in anticipation of higher demand, reduction in the cost of operations and business risk. Edited excerpts:
BT: What are your key takeaways from India Inc’s March quarter earnings season? Which sectors delivered strong surprises and which one disappointed?
The revival in earnings was largely driven by the benign input cost and moderation in inflation, thus upgrading operational profitability. Sector-wise performance was mixed. The metals and mining sector’s results were better than expectations, driven by higher realisations as international prices rose amid supply chain disruptions. Pharma did well by with increase in complex drugs and reduction in chemical cost. Domestic market-oriented sectors like banks and telecom delivered better-than-estimated results. In contrast, auto, IT, and FMCG registered a flat to weak set of earnings growth due to global and domestic slowdown.
BT: How are global headwinds like geopolitical tensions influencing earnings of Indian companies?
The reduction in global inflation and crude prices has helped India cut input costs. Tariff-related risks are proving beneficial for higher orders and enquiries sector wise. Additionally, the recent decline in the US dollar has supported Indian markets. In fiscal terms, micro gains and FIIs inflows, though further depreciation may not be desirable, as it could negatively impact global equity markets.
BT: Are signs of rural recovery or slowdown visible in sectoral performance, especially FMCG, agri-inputs, or auto?
Over the year, rural consumption volumes have been in recovery due to better rabi production and a reduction in inflation. However, the urban demand softness weighed on the overall performance of FMCG and agri-inputs. Going forward, the expectations of another favourable monsoon, easing inflation, and income tax relief are likely to drive consumption across both rural and urban markets, which are expected to benefit all these segments. An improvement is evident through the early signs of pickup in the FMCG sector and valuations.
BT: How do you read the IT sector’s Q4 results?
The Q4FY25 results reinforced a cautious industry outlook, reflecting a slowdown in hiring amid ongoing global uncertainties and new technology adaptation. The first quarter of FY26 has started on a tepid note, with market momentum falling short of expectations due to subdued global discretionary spending. However, the industry remains optimistic, supported by order pipelines and strategic initiatives such as internal AI talent upskilling and cost efficiency. As tariff negotiations progress and sentiment stabilises with cuts in interest rates, the sector may see renewed confidence in hiring plans and long-term growth prospects. After the recent rally, the sector’s valuations are above the long-term average.
BT: What do the banking or NBFC earnings say about the credit cycle and asset quality outlook?
The credit cycle has been moderating in the last one year, leaving banks and NBFCs focused on managing yield spreads and preserving asset quality. FY25 saw asset quality pressures, particularly in the microfinance and personal loan segments. In response, lenders are adopting a cautious stance, expecting moderation in credit growth in the short-term. However, recent trends suggest these risks are beginning to ease and asset quality to improve during the year.
BT: Based on the Q4 results and management commentaries, what is the earnings growth outlook for FY26?
The outlook for FY26 has marginally improved due to better-than-forecast Q4 results. The sentiment could turn more positive if inflation, interest rates, and tariff-related uncertainties ease over the course of the year. Additionally, taxation benefits and an increase in government spending are forecast to boost domestic demand. Currently, the market is estimating an earnings growth of 10-12% in FY26, better than the forecast of sub-5% in FY25.
BT: Which sectors are likely to lead earnings growth in FY26 based on Q4 cues?
Rate sensitives like banks, NBFC, auto and realty are expected to hold an upper hand in FY26 in anticipation of higher demand, reduction in the cost of operations and business risk. Otherwise, domestic consumption is expected to boost in the coming quarters, which is likely to be positive for FMCG, consumer durables, fertilisers and agri sector.
BT: Have the Q4 results changed your sectoral or portfolio stance for the next 2–3 quarters?
We are diversifying our primarily large-cap-oriented portfolio by selectively increasing exposure to mid- and small-cap equities. In the last 2-3 quarters, the premium valuations of midcaps to large caps have reduced to the long-term average. Domestic risk has reduced, and global risk can moderate further in the future if the tariff war subsides with the finalisation of the BTA.
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