Nifty 50 companies see 4.4% YoY growth in Q3 FY25, a small uptick from 4.2% in Q2

As companies continue to release their Q3 FY25 financial results, the earnings growth for Nifty 50 firms has remained subdued.

A report by JM Financial reveals that, out of the 50 companies in the Nifty 50 index, 26 have reported their Q3 results so far, showing a modest 4.4% year-on-year (YoY) growth. This figure is slightly above the 4.2% growth reported in the previous quarter, but still falls short of the initial estimate of 5.8% growth for the quarter.

The report highlighted the discrepancy between expectations and actual performance, stating, "Against our earlier forecast of 5.8% YoY growth (excluding BFSI sector growth of 2.1%), the 26 companies that have reported so far have only delivered 4.4% YoY growth. As a result, we have revised down the FY25 EPS growth estimate to 3.8% from the previous 5%."

The slower-than-expected performance has led to a downward revision of the full-year earnings per share (EPS) growth estimate for Nifty 50 companies to 3.8% for FY25, compared to the earlier estimate of 5%.

Throughout FY25, Nifty 50 companies have faced weak earnings growth. In Q1FY25, EPS growth was 5.5% YoY, while in Q2FY25, it slowed further to 4.2%. With Q3FY25 also underperforming, the overall trend points to a lackluster financial performance for the year.

Despite the weaker near-term results, the report remains optimistic about earnings growth for Nifty 50 companies in FY26, projecting an 18.3% increase in EPS. This optimism is fueled by several factors, including government tax cuts and fiscal discipline.

The government’s fiscal deficit for FY25 is now expected to be 4.4% of GDP (down from the earlier estimate of 4.5%), and for FY26, it is projected at 4.8% (compared to 4.9% previously).

The report raises the question of whether the government is signaling the Reserve Bank of India (RBI) to cut interest rates, with a controlled fiscal deficit providing room for such a move. Lower interest rates could encourage economic growth by reducing borrowing costs for businesses and consumers.

While near-term earnings remain weak, the outlook for FY26 is positive, driven by favorable government policies, a stronger rural economy, and higher capital expenditure.