The Nifty50 has cleared the first earnings hurdle of FY27 with considerably more ease than expected. But the bigger test now lies ahead.
Nifty50 earnings per share grew 12.9% year-on-year (YoY) in the June quarter, far ahead of JM Financial's 4.5% estimate, yet the brokerage says the index needs to deliver 16.7% EPS growth over the remaining nine months of FY27 to meet its full-year forecast.
In their latest India strategy note, JM Financial analysts Venkatesh Balasubramaniam and Shanay Mehta said the Q1 earnings season was stronger than anticipated, particularly among large caps.
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However, with the brokerage's FY27 EPS growth forecast now at 15.2%, the earnings burden has shifted to the remaining three quarters.
Q1 Beat Was Much Stronger Than Expected
Nifty50 EPS grew 12.9% YoY in Q1FY27, versus JM Financial's expectation of 4.5%. Even after excluding financials, EPS growth stood at 11.5%, against an expected 1.9%.
Excluding both financials and oil & gas, EPS increased 7.6%, more than double the brokerage's 3.2% expectation.
The strongest EPS growth came from Internet at 268%, followed by Metals & Mining at 49%, Consumer Retail at 48%, Cement at 41%, Telecom at 37% and NBFCs at 36%.
Aviation was the weakest performer, with EPS declining 110.9% YoY.
The beat was also broad enough at the company level: 50% of Nifty50 companies beat estimates, while 22% missed and the rest reported in line.
The 16.7% Ask Is The Real Test
Despite the stronger Q1, JM Financial has not materially raised its earnings expectations. The brokerage has cut its FY27 Nifty50 EPS estimate by 0.4%, while raising its FY28 estimate by 0.3%.
Its FY27 EPS growth forecast now stands at 15.2%, compared with 15.6% earlier. FY28 growth is estimated at 17.6%, up from 17.3%.
That means the Nifty50 needs to generate 16.7% EPS growth during the remaining nine months of FY27 to reach the current full-year estimate — an outcome JM Financial describes as “relatively demanding.”
Four Sectors Have To Carry The Earnings Load
The brokerage expects Metals & Mining, Automobiles, NBFCs and Telecom to do much of the heavy lifting.
JM Financial expects FY27 EPS growth of 29% for Metals & Mining, 24% for Automobiles, 36.4% for NBFCs and 43.5% for Telecom. These sectors therefore become particularly important to the Nifty50's ability to sustain the earnings trajectory implied by the full-year forecast.
The broader JM Financial coverage universe also delivered an 8.4% YoY increase in Q1 EPS. Metals & Mining, Fintech, Consumer Retail, Power Equipment and Real Estate were among the stronger performers, while Aviation, Oil & Gas and Infrastructure remained weak.
Large Caps Are Leading The Way
The quality of the Q1 beat was strongest among large-cap companies. 51% of large caps beat estimates, compared with 42% of small caps and 41% of midcaps.
For investors, that leaves the market with a deceptively simple question: was Q1 the beginning of a stronger earnings cycle, or merely a good start that leaves an unusually high bar for the rest of FY27?
With a 16.7% growth requirement ahead, Metals, Autos, NBFCs and Telecom may have to provide the answer.
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