India’s corporate earnings might be entering a steadier phase after months of disruptions, and global brokerage Jefferies believes the next big shift could start showing up from the second half of FY26 (Financial Year 2026).
As per the brokerage house report, the drag from unusual weather, slower demand after Goods and Services Tax (GST) rate cut announcements, and pressure on banks from faster interest-rate reductions is now fading. Sectors that were hit the hardest were the autos, banks, power and consumer may finally see numbers normalise, setting up a cleaner base for FY27.
Let’s take a look at the brokerage view on the earnings cycle-
Jefferies on Earnings: Tough H1 sets stage for a better second half
The brokerage house pointed out that the slowdown earlier this year was not driven by weak fundamentals alone. According to the brokerage, “Corporate earnings in H1FY26 were affected by weather-related factors, including a cooler summer and above-normal monsoon, which dampened power demand and slowed construction activity.”
The report also noted that the announcement of GST rate cuts pushed consumers to delay purchases, which affected retail-facing sectors. Banks, too, saw pressure as “Banks’ earnings have been impacted by accelerated rate cuts,” the brokerage said.
As a result, the brokerage highlighted that “MSCI India FY26 consensus earnings were cut by a cumulative of 4.1% post Jun’25 and Sep’25 results.”
Why Jefferies thinks H2FY26 will look better
Despite the rough patch, Jefferies believes earnings can stabilise from here. Based on its estimates, “JeFE estimate for MSCI India’s H2FY26 earnings growth is at 10% YoY,” almost matching the 11% rise seen in the first half.
This expected recovery is driven mainly by domestic consumption sectors such as consumer staples, automobiles and discretionary goods, the areas that benefit the most from GST-related demand revival. Consumption-linked volumes are already showing early improvement, which, according to the report, could support operating leverage in the coming quarters.
The brokerage added that sectors such as information technology (IT), energy and financials may not see a sharp rebound, but importantly, “bulk of downgrades on other sectors like IT and Energy (low power demand) are likely behind.”
Jefferies believes the chances of further broad-based earnings cuts in H2FY26 are now low.
FY27 may be the first ‘Clean’ year after disruptions
The earnings pickup is expected to gather more momentum in financial year 2027. Jefferies forecasted that “MSCI India earnings are projected to grow by 16% in FY27E, a 6ppt acceleration YoY.”
A large part of this jump is concentrated in about 28 companies across sectors such as automobiles, banks, telecom, consumer staples, healthcare, aviation, energy and industrials. Once these names are excluded, the underlying trend remains steady – MSCI India earnings could rise 13% in FY26 and 15% in FY27.
Jefferies added that FY26 numbers may actually be understated because of temporary issues in sectors such as banking where net interest margins (NIMs) were compressed due to rapid rate cuts and power, which saw weak summer demand because of unusual weather.
The brokerage also mentioned that consumer companies and automakers could see the full benefit of GST rate cuts only in FY27.
Margins may see a small lift too
Revenue growth for non-commodity sectors is expected to stay in the 13-14% range for both FY26 and FY27. Jefferies also expects slight improvement in profitability, saying, “EBITDA margins for these companies are projected to improve by 20bps in each of FY26E and FY27E.”
However, the report also warned that margin expectations might be a bit optimistic since FY26 margins are already back to near FY20 levels.
Sectors with strongest earnings momentum
Jefferies highlighted two sectors, that is, cement and telecom as having some of the strongest expected earnings growth ahead. In fact, according to the report, “Cement and telecom are the fastest growing sector with earnings growth at 34% and 25% respectively.”
This strength is partly due to multi-year low pricing in cement after GST adjustments and normalisation in telecom tariffs.
Banks, power companies and consumer stocks may also see a recovery due to low base effects, normalising demand trends and a shift away from weather-related distortions.
