Nifty Reports 3rd Consecutive Quarter of Single-Digit Growth

The Indian equities market is painting a bleak picture in the current calendar year as benchmark indices were down by nearly 4%. On a year-to-date basis, the BSE midcap and smallcap indices fell by 16% and 20% respectively on the back of surging greenback, heightened FII outflows and Trump’s tariff threats. Additionally, the earnings of India Inc has largely remained muted, leading to outflows in the border market segment.

Motilal Oswal Financial Services (MOSL) said that earnings during Q3FY25 remained modest, followed by the worst downgrade ratio since Q1FY21). The earnings season in the December quarter largely remained muted, buoyed by BFSI, positivity in sectors including technology, telecom, healthcare, capital goods and real estate.

Nifty50 reported a third straight quarter of single-digit growth. It delivered a profit growth of 5% YoY, which were in line with the estimates. While largecap companies met the estimates, midcaps outperformed the estimates, but smallcaps took a heavy beating. Close to 87 midcap companies shot up, of which financials (PSU banks & NBFCs), commodities (metals and oil & gas) and retail contributed 26% of the earnings.

According to the MOSL report, earnings of about 121 companies saw a drop of 24% YoY, while 56% of the companies from the brokerage’s coverage missed the estimates. It said, “Nifty EPS estimates for FY26 cut by 1.4 per cent to Rs 1,203, mainly due to ONGC, HDFC Bank, JSW Steel, Axis Bank and SBI. For FY27, EPS estimates are reduced by 1.8 per cent to Rs 1,373 due to downgrades in SBI, HDFC Bank, ONGC, Tata Steel and Reliance Industries.”

As per the Nifty50 pack, Bharti Airtel, Hindalco, Tata Motors, Kotak Mahindra Bank and Maruti Suzuki saw their earning upgrades in the range of 3.5-9.2% for FY26. JSW Steel, Tata Consumer Products, Tata Steel, Trent and Dr Reddy's Labs witnessed an earnings downgrade for FY26E in the range of 5-9.5%, MOSL report said.

Motilal added, “We continue to remain biased toward large caps with a 76 per cent allocation in our model portfolio. We are 'overweight' on consumption, BFSI, IT, industrials, healthcare and real estate, while we are 'underweight' on oil & gas, cement, automobiles, and metals.”

In the year 2025, FIIs have offloaded Indian equities worth ₹1 lakh crore. The first half of February has witnessed outflows to the tune of ₹21,000 crore. As per the current economic indicators, FII outflows are likely to continue in the coming times.

CY25 is likely to remain weak with continued downgrades, Bofa Securities said. The brokerage is expecting single digit growth for the current calendar year. Weak FII inflows amid strong US bond yields and rich valuations are likely to wither, the brokerage noted.

Trivesh D, COO at Tradejini believes that Q3 results have failed to meet expectations after poor QoQ and YoY performance.

He added, “The next significant trigger could come from the year-end results, which should offer more clarity on the overall business environment and future direction. It is evident that market players are in wait-and-watch mode. Year-end results may give clearer indications about the business environment and directions going ahead.”