Improving Macros Seen Supporting Corporate Profit In FY26 Despite Weak FY25

Corporate earnings are expected to see some support in the financial year ending March 2026 from improving domestic macroeconomic indicators, even as companies reported muted growth in the previous financial year.

In the preceding financial year, Nifty 50 companies reported single-digit earnings growth amid weak urban demand and stagnating nominal wage growth. However, the January-March quarter surprised on the upside, with strong results from sectors such as metals, oil marketing, public sector banks, automobiles, healthcare, technology, and capital goods. Despite continued caution in the fiscal 2025-26, consensus estimates point to earnings per share growth staying in the single-digit range, supported by improving fundamentals.

The consolidated net profit for Nifty 50 companies is estimated to grow by around 5% in the ongoing financial year as opposed to the low double-digit growth seen in the years following the pandemic until the financial year 2024-25, according to data compiled by NDTV Profit via Bloomberg.

From the financial year ending March 2020 through March 2024, we saw earnings grow at a CAGR of almost 20%, said Dhananjay Sinha, CEO and Co-Head Institutional Equities at Systematix Group. In the previous financial year, the earnings growth has been in the range of 4.5-5% and are likely to range between 5-6% in the ongoing fiscal, he added.

Swarup Mohanty, vice chairman and CEO at Mirae Asset Investment Managers, said corporate performance saw one-way growth after Covid-19, driven by a ‘Kal Ho Na Ho’ mindset of consumption.

However, four years of high consumption were followed by a slowdown due to structural macroeconomic factors. “While we expect the urban slowdown to continue, the expectation of a good monsoon season this year, along with lower retail inflation, will continue to set the stage for a rural comeback,” Mohanty said.

He added that the rural sector’s size may help compensate for urban weakness in the second half of the year. “That said, this year will be more about interest rates and tariffs, and the expectation of any major positive surprises before next year remains low.”

The corporate performance in January-March period was satisfactory and that there is room for improvement in the ongoing financial year if consumption picks up, Bank of Baroda said in a research note. The sectors linked to infrastructure are showing steady growth, even against a weak base, the note said. Meanwhile, consumer-linked sectors such as FMCG and consumer durables are seeing recovery aided by rural and seasonal demand, along with support from services.

The note added that companies remain optimistic despite the global environment. Key drivers of demand and growth include stable commodity prices, low inflation, a favourable monsoon, ongoing trade deals, government capex, and tax incentives.

India’s headline inflation eased to 3.16% in April from 3.34% in March — the lowest since July 2019.

“High inflation created so much pain for the Indian economy that some relief is likely to reflect in earnings for the ongoing fiscal,” said Pranjul Bhandari, chief India economist at HSBC. “However, just like the impact of high inflation took time to percolate, the impact of easing inflation too is likely to be gradual, but will show up in a lot of places along with lower oil prices.”

Bhandari also said the eventual impact of lower oil prices on consumption remains uncertain, depending on how the government uses increased revenues from oil. “Eventually, informal consumption will likely rise given that mass consumers have a higher propensity to consume,” she said. “However, this might be a temporary story.”

Sinha cautioned that low nominal wage growth suggests structural economic challenges. While lower crude oil prices could help corporate margins, household incomes need to improve. “The stimulus announced by way of income tax concessions might be too small to have a discernible impact on propelling consumption growth, and the cut in benchmark lending rates can also be seen as a lagging response to a weaker economy,” he said.

Bhandari noted the potential for a supply chain shift, adding that India may not benefit in high-value segments such as semiconductors, but could increase exports in mid-value categories like textiles.