As Dalal Street gears up for another earnings season, the mood is tinged with caution. A growing chorus of brokerages expects the cloud of sluggish revenue and profit growth to linger into the first quarter of FY26, extending the weak momentum that marked much of FY25.
Analysts from firms such as Nuvama Institutional Equities, Kotak Institutional Equities, and Emkay Global Financial Services estimate the topline growth for India Inc—excluding oil marketing companies—to hover between 2.5% and 5%. That’s a significant pullback from the 9% growth clocked in the previous quarter. If these forecasts hold, this would be the ninth consecutive quarter where corporate India sees sub-10% revenue growth.
Emkay Global attributes this persistent softness to what it calls a ‘trio of troublemakers’: a slowing economy, falling inflation that’s putting the brakes on nominal topline growth, and margin compression for banks that is weighing on net interest income.
In line with the muted revenue outlook, brokerages expect profit growth to tread a similar path, likely rising by around 5% year-on-year, mirroring the mid-single-digit trend seen in sales.
Margins, too, appear to have settled after their post-Covid expansion. As Nuvama points out, “Margins are by nature mean-reverting, if they’re abnormally high, they tend to attract more competition or prompt a supply response from incumbents.” With margin expansion levers largely exhausted, profit growth now appears to be catching up with the reality of weak revenue growth.
The result is likely to be a patchy recovery in profits, falling short of earlier hopes for a much stronger earnings rebound in Q1. Nuvama forecasts that Nifty 50 earnings per share (EPS) will inch up by just 5% in the quarter, compared to a projected 10% growth for the full financial year, leaving the index more vulnerable to earnings downgrades.
“With topline growth slowing, rate cuts staying shallow, and valuations already lofty, margin mean reversion could well be the key driver of alpha,” Nuvama added.
That said, Emkay Global struck a more upbeat tone, forecasting a pickup in growth momentum in the latter half of FY26. The brokerage expects that monetary easing, coupled with a favourable monsoon, could help revive consumer demand.
““The asking rate for FY26 is now pushed up, with a material H2FY26 recovery required to meet the Nifty EPS target of 11% on year growth,” Seshadri Sen - Head of Research - Institutional Equities, Emkay Global said. "In the near term, though, with stretched valuations and limited signs of monetary transmission, we see the market staying range-bound.”
The task is much more difficult for the blue-chip Nifty 50 as Emkay sees profit for the large-cap pool rising by a collective 2.3% on year, on a topline growth of merely 0.3%. This tracks well below the estimated 11% profit growth for FY26, meaning that the demand revival in the second half of the fiscal will need to do much of the heavy lifting.
Winners and Losers
On the sectoral front, most brokerages expect non-banking finance companies, electronic manufacturing, internet, industrials, and renewable energy and healthcare players to report moderate to good topline growth.
While construction material companies are likely to benefit from the improvement in realizations due to price hikes, healthcare firms may enjoy tailwinds from higher footfalls, new bed additions and a slight uptick in the average revenue per occupied bed (ARPOB), KIE noted.
In addition, solar capacity addition stands to improve earnings for renewable energy firms and higher average revenue per user (ARPU) will work in favour of telecom operators, the brokerage said.
On the flipside, banks may struggle due to margin pressures, information technology names due to uncertain macro conditions and staples due to sluggish demand. For these sectors, Sen sees a mismatch in fundamental growth and valuations, which are yet to fully adjust.
