Markets nervy as Indian Inc earnings hit four-year low; experts see better H2

India's corporate earnings slump has raised economic slowdown concerns, as top companies in the blue-chip Nifty 50 index recorded their worst quarterly results since the March 2020 pandemic onset, Reuters reported.

Over 50% of the 44 companies in the index that have released earnings so far missed analysts' expectations or reported lacklustre results, according to LSEG data.

This marks the weakest performance since the COVID-19-triggered downturn, when only about 20% of Nifty 50 firms beat estimates.

Analysts at Jefferies and Bernstein attributed the weak earnings to curtailed government spending in April-June, related to national elections, which carried over into the September quarter. Above-normal rainfall further dampened earnings performance, Reuters reported.

Indian equities have fallen roughly 8% from their September 26 record high, with October delivering the market's worst monthly performance since March 2020, exacerbated by foreign investors redirecting funds following China's latest stimulus measures.

Jefferies noted this season saw the highest rate of earnings downgrades since April-June 2020 across 121 companies it covers, while Motilal Oswal highlighted an 8% drop in earnings growth for 166 companies — marking the worst performance in 17 quarters against a projected 4% decline.

Also read: Q2 Jitters: Nearly half of India Inc has missed profit estimates so far

Bernstein remarked that the recent weakness might be an anomaly, following sustained growth, but noted further moderation in the Nifty could follow.

Analysts also cited broad economic pressures.

UltraTech Cement and Larsen & Toubro flagged demand weakness in construction, and major banks struggled to recover unsecured loans. FMCG leaders like Nestle India and Hindustan Unilever reported dull urban consumption, and September factory growth slowed to an eight-month low.

JM Financial’s Venkatesh Balasubramaniam cautioned against prematurely calling this a full economic slowdown, noting one quarter's earnings alone may not confirm the trend. "It’s too soon to make that call, especially with government capex potentially rising in the second half," he said.

Government capital expenditure has fallen by 15% in the first half of fiscal 2025, Jefferies added, but with weather disruptions now behind, the second half could see a 25% uptick in spending, helping to lift earnings and markets, Reuters added.