JM Financial Cuts Nifty EPS Growth Forecasts, Flags Risks From Key Sectors

Financial services company JM Financial has lowered its Nifty earnings per share (EPS) growth expectations for both FY25 and FY26, citing concerns on the uncertainty and market volatility created by US tariffs. The biggest risk for FY26 stems from IT, auto and auto ancillaries, and chemicals, according to Venkatesh Balasubramaniam, Managing Director and Co-Head of Research, JM Financial.

“We saw 7 to 8% kind of EPS growth for the first nine months of FY25. We were expecting EPS growth for the full year to be between 4% and 5%, which implied that the asking rate for the fourth quarter was close to 3%. We are expecting that Nifty EPS will get cut by around 2%. So first of all, we don't think the 4 to 5% growth for FY25 is going to be achieved,” Balasubramaniam told NDTV Profit.

He added that JM Financial’s proprietary analysis suggests nearly 35% of their coverage universe may see downward earnings revisions. “My best guess is that for FY26, it is very hard to see EPS growth of more than 8% to 10%,” he said.

According to him, sectors likely to face the steepest earnings cuts include IT, auto and auto ancillaries, chemicals, and industrials. Banks may also see a challenging fourth quarter.

“At this point, for FY26, the bigger risk emanates from IT, auto and auto ancillaries, and chemicals. In chemicals, we're going to see some cuts in industrials. So it is almost a broad-based kind of cut,” he noted.

While IT isn’t directly impacted by tariffs, Balasubramaniam warned of secondary effects.

“IT per se, there is no concern on tariffs. But if tariffs play out, you could see a slowdown in the US economy. If there is a slowdown in the US economy, there is going to be a slowdown in IT services. Secondly, valuations in IT are not cheap. Still trading almost greater than one standard deviation above the mean. So, IT is not the best sector to be overweight on at this point,” he said.

Banking is expected to remain strong in FY26, although Balasubramaniam flagged short-term risks related to aggressive rate cuts. These could compress net interest margins (NIMs) due to loan books being linked to the repo rate. The fourth quarter may also be challenging, with slower loan and CASA growth, higher credit costs, and NIM compression.

“At this point, we are worried about banks also because while the liquidity has come back in April, we had two rounds of rate cuts. If there are more rate cuts, you have to remember that the loan book is linked to the repo rate. So there could be a risk, but we are not calling out the risk on banks at this point,” he said.

Balasubramaniam prefers companies that are reasonably valued and fundamentally strong in the consumption space.

“My way of thinking is a little old-fashioned. I like stocks that make sense on PE multiples—nothing more than 25–30 times one or two years forward,” he said.

In terms of picks, he likes Varun Beverages and Maruti Suzuki, along with other domestic-focused plays that may not be traditional consumption names.

“Telecom is almost a staple now—we like Bharti, we still like RIL, and in cement, we’ve seen month-on-month price increases of 2–2.5%. That should help operating leverage play out, so we like UltraTech. We also like some real estate names like DLF,” he added.

The top executive called falling crude prices a big positive for India. “India is hugely dependent on crude. So with prices coming down, we’re very positive on oil marketing companies and refiners—refining margins should be strong,” he said. He also expects IndiGo to post strong results thanks to lower fuel costs.

On commodities, he remained cautious. “Prices should stay weak over the next six to nine months due to global uncertainties. So we’re not recommending anything in that space right now,” he said.

Balasubramaniam advised investors to be patient when it comes to tariff-sensitive stocks.

“Wherever stocks are likely to be impacted by tariffs, I’d suggest waiting until the end of April. Don’t rush in. Things could remain volatile with every new update or headline. Let the dust settle a bit before making a call,” he said.