Mint Primer | Can the market tide over the earnings slump?
Adjusted net profit of the BSE-30 index increased 10% year-on-year, while that of the Nifty50 rose 8.8%. A large portion of the incremental growth in net profits of the Nifty50 index came from just two companies—Bharti Airtel and State Bank of India.
The Nifty50 index has tumbled 8% over the past six months. The Q3 results season offered little cheer, with multiple sectors witnessing muted topline growth amid domestic and global macro headwinds. Can Dalal Street overcome the near-term hiccups? Mint explains:
How did corporate India fare in Q3?
Overall, it was a lacklustre show. Adjusted net profit of the BSE-30 index increased 10% year-on-year, while that of the Nifty50 rose 8.8%. A large portion of the incremental growth in net profits of the Nifty50 index came from just two companies—Bharti Airtel and State Bank of India. In the broader market, Q3 profit-after-tax growth for BSE500 firms (excluding oil marketing companies) remained weak at 8%, compared with 9% in the first half of FY25 and 21% in FY24. The topline rose just 8%, marking the seventh straight quarter of sub-10% growth.
What were the factors behind the Q3 slump?
The most worrying trend is that demand slowdown has spread from export-oriented sectors to domestic consumption. The profit gap between high-end and mass-market demand narrowed with stronger segments such as personal vehicles, hotels, durables and jewellery slowing, Nuvama Institutional Equities noted. IT firms’ earnings and toplines stabilized despite Q3 being seasonally weak, while industrials, telecom, pharma and chemical firms, too, posted a decent showing. Profit growth of small- and mid-caps—more exposed to domestic consumption—is now undershooting that of large-caps.
Read more: BSE: From bear market bait to global investment darling. Will it hold?
How did the banking sector perform?
Banks posted mixed earnings due to deceleration in loan growth, although benign credit costs aided profitability. Deposit mobilization remains a challenge. Despite recent RBI measures, system liquidity is in deficit, and the ‘war for deposits’ has not ebbed. Lenders reported stress in unsecured retail loans (personal loans credit cards) as well as microfinance.
What about consumption firms?
Like in the past few quarters, FMCG volumes were subdued in Q3 amid slowing urban demand and a sustained rural recovery. Consumers are downtrading to smaller packs in the premium segments. Despite it being a festive quarter, retail and fast-food chains saw muted growth. Automobile volumes were weak. However, real estate posted robust pre-sales, buoyed by luxury and ultra-luxury housing demand. Electronics manufacturing services stood out, with analysts estimating a 50-60% demand growth in 3-4 years.
What is the near-term outlook for markets?
Benchmark indices have fallen about 13% from record highs in September, with small- and mid-caps posting sharper declines. But valuations are still expensive. As per Bloomberg consensus estimates, Nifty earnings are forecast to grow 14% in FY26 from 4% in 9MFY25. “For BSE500, consensus is building PAT growth of 14–16% each in FY26 and FY27 (versus 9% in 9MFY25). This is likely to disappoint as demand dynamics are still weak, which could erode record-high profit margins," Nuvama said.
Read more: Mint Quick Edit | An earnings let-down adds to the bearish trend
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