Tepid Q3 outlook spells more pain for India Inc. earnings

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Subscribe to enjoy similar stories. IT bellwether Tata Consultancy Services Ltd (TCS) is set to begin the third-quarter earnings season. However, Indian companies are bracing for another quarter of muted growth as the December quarter preview by leading brokerages suggests that the earnings slowdown seen in the first half of 2024-25 is far from over.

Analysts warn that overvaluation concerns and shifting global market sentiment will likely keep the momentum subdued across key sectors. Nifty 50 companies serve as a benchmark for assessing Indian corporations' performance, and forecasts for the October-December period indicate weak single-digit revenue and net profit growth. Brokerage firms Motilal Oswal Financial Services Ltd and Mirae Asset Sharekhan expect revenue and net profit to grow nearly 6% year-on-year (y-o-y).

Antique Stock Broking predicts even slower revenue growth of 4.8% y-o-y but slightly stronger profitability growth of 7.2%. Nuvama Research expects modest revenue growth of 5% but significantly lower profit growth of just 2% on-year. “Corporate earnings will be muted as we have imported inflation by depreciation of the rupee.

This has resulted in an elevated interest rate cycle to attract capital," said Manish Bhandari, chief executive and portfolio manager at Vallum Capital Advisors. According to a Mint analysis, the pack of Nifty 50 companies has been grappling with an earnings slowdown for the past two quarters. Revenue growth decelerated to 7.9% in Q2FY25, the lowest in at least seven quarters, underscoring the challenges faced by corporate India.