Corporate India’s earnings are expected to recover in FY27 despite elevated crude oil prices in Q1 FY27 that is expected to cause inflationary pressures amid the Iran-US war.
JM Financial has revised its estimated Nifty 50 earnings per share (EPS) growth for FY27 forecast to 17.1% from 15.1% projected earlier. The main sectors driving this growth are likely to be automobiles, metals and mining, NBFCs, telecom and infrastructure.
However, JM Financial noted that risk remains as India Inc has seen a repeated trend of earnings downgrades in recent years. “Against the backdrop of elevated crude oil prices, potential inflationary pressures and rising external uncertainties, we believe the risk to FY27E earnings expectations remains skewed to the downside,” JM Financial noted.
Automobiles, metals and telecom to drive FY27 growth
JM Financial forecasts earnings growth of 55% for automobiles, 36% for metals and mining, 32% for NBFCs, 44% for telecom and 19% for infrastructure companies.
Private banks will remain critical to the earnings story. The sector accounts for more than 31% of the Nifty 50 profit pool and is expected to deliver around 13% earnings growth in FY27.
On the other hand, consumer companies, utilities and public sector banks are expected to see relatively modest earnings growth.
Q4 earnings largely in line with estimates
This upward revision in JM Financial’s FY27 EPS estimates came after the Nifty 50 companies reported EPS growth of 4.4% year-on-year (YoY) in Q4 FY26, broadly matching expectations.
Among sectors, internet companies posted the strongest earnings growth at 346%, followed by telecom at 38%, cement at 32%, consumer retail at 28%, utilities at 26% and automobiles at 26%.
Aviation, however, was the weakest-performing sector, with earnings plunging 174.6% from a year ago.
Utilities, consumer and cement companies beat earnings estimates the most during the quarter, while pharmaceuticals, oil and gas, and internet companies missed estimates.
JM Financial urges caution
However, JM Financial caution investors against assuming a sharp recovery despite an improved outlook due to the continued lag in FY26 expectations
The brokerage firm noted that Nifty 50 earnings per share grew just 4.5% in FY26, far below its earlier estimate of 12%. The trend mirrors FY25, when actual earnings growth came in at 3.4% against expectations of around 15%.
Several sectors missed FY26 expectations
JM Financial said the sharp gap between forecasts and actual earnings growth in FY26 was not solely due to changes in Nifty constituents.
Several key sectors underperformed expectations. Banks reported profit growth of 3.6% against an expected 7.1%, while automobile companies saw profits decline 17.5% compared with an expected growth of 4.9%.
Pharmaceutical companies posted a 9.7% decline in profits despite expectations of nearly 19% growth, while consumer companies also fell short of forecasts.
The earnings misses were most common among small-cap companies. About 33% of small-cap firms missed expectations during the quarter, compared with 29% of large-cap companies and 18% of mid-cap firms.
Conclusion
JM Financial said the recent history of repeated earnings downgrades, coupled with risks from higher crude oil prices, inflationary pressures and global uncertainties, warrants caution despite the stronger FY27 earnings outlook.