The pace of upgrades will be crucial for determining the direction of the market.
Mumbai: Investors may have a reason to cheer amid elevated uncertainties over the fallout of tariffs in the near term. Analysts have increased the earnings per share (EPS) estimates of most large companies following the March quarter, reversing two straight quarters of downgrades.
Of the companies on the Nifty 500 index tracked by at least five analysts or more, 315 saw EPS upgrades in the fourth quarter compared with the December quarter, according to data from Eikon.
EPS estimate upgrades signal improving earnings outlook, boosting investor confidence and often driving stock prices higher.
"After two consecutive quarters of disappointing earnings, we've now seen some early rounds of earnings upgrades from analysts across selective companies following the fourth quarter numbers," said Aniruddha Sarkar, chief investment officer and portfolio manager at Quest Investment Advisors. "Government capex picking up sharply in the last four months is largely responsible for the same, along with a pickup in consumer spending."
Analysts had moderated the earnings outlook in the previous two quarters after profits slowed to single digits amid concerns over an economic slowdown. The EPS growth of Nifty 50 was at 4.1% in the June quarter and 8.9% in the September quarter from the year-ago periods. In January-March, EPS grew at 10.9% from the same period a year ago. The EPS growth for FY25 was at 9% year-on-year.
Slowing corporate earnings and the resultant downgrades by analysts were reasons for the sell-off in Indian equities between September-end and March, as investors found stock valuations rich in the face of the squeeze in profitability. Money managers expect further recovery in earnings in the quarters ahead.
The Nifty's EPS is expected to grow at about 13% on a compounded basis between FY25 and FY27, up from 10.9% in the fourth quarter, supported by a lower base of FY25, accommodative monetary policy, and continued government spending, said Nikhil Rungta, co-chief investment officer - equity at LIC Mutual Fund.
"Banks benefited from improved asset quality, while the auto sector saw steady domestic demand and successful new launches," he said. "Government-led capex supported infrastructure and real estate, and a rural demand revival boosted consumption."
The pace of upgrades will be crucial for determining the direction of the market. "We believe the first quarter of FY26 could see some more modest upgrades but the pace of upgrades across the broader market could pick up from Q2 onwards as the low base of FY25 will come into play," said Sarkar.
Of the companies on the Nifty 500 index tracked by at least five analysts or more, 315 saw EPS upgrades in the fourth quarter compared with the December quarter, according to data from Eikon.
EPS estimate upgrades signal improving earnings outlook, boosting investor confidence and often driving stock prices higher.
"After two consecutive quarters of disappointing earnings, we've now seen some early rounds of earnings upgrades from analysts across selective companies following the fourth quarter numbers," said Aniruddha Sarkar, chief investment officer and portfolio manager at Quest Investment Advisors. "Government capex picking up sharply in the last four months is largely responsible for the same, along with a pickup in consumer spending."
Analysts had moderated the earnings outlook in the previous two quarters after profits slowed to single digits amid concerns over an economic slowdown. The EPS growth of Nifty 50 was at 4.1% in the June quarter and 8.9% in the September quarter from the year-ago periods. In January-March, EPS grew at 10.9% from the same period a year ago. The EPS growth for FY25 was at 9% year-on-year.
Slowing corporate earnings and the resultant downgrades by analysts were reasons for the sell-off in Indian equities between September-end and March, as investors found stock valuations rich in the face of the squeeze in profitability. Money managers expect further recovery in earnings in the quarters ahead.
The Nifty's EPS is expected to grow at about 13% on a compounded basis between FY25 and FY27, up from 10.9% in the fourth quarter, supported by a lower base of FY25, accommodative monetary policy, and continued government spending, said Nikhil Rungta, co-chief investment officer - equity at LIC Mutual Fund.
"Banks benefited from improved asset quality, while the auto sector saw steady domestic demand and successful new launches," he said. "Government-led capex supported infrastructure and real estate, and a rural demand revival boosted consumption."
The pace of upgrades will be crucial for determining the direction of the market. "We believe the first quarter of FY26 could see some more modest upgrades but the pace of upgrades across the broader market could pick up from Q2 onwards as the low base of FY25 will come into play," said Sarkar.
