As companies unveil their financial results for the third quarter of FY25, the overall earnings growth for Nifty 50 firms has been disappointing. A report from JM Financial indicates that of the 50 companies in the index, 26 have released their Q3FY25 results, revealing a modest year-on-year (YoY) growth of just 4.4%. This figure falls short of the previous estimate of 5.8% growth for the quarter.
The report stated, “In contrast to our expectation of 5.8% YoY growth (excluding BFSI growth at 2.1% YoY) for Q3FY25, the 26 Nifty 50 companies that have reported thus far have achieved only 4.4% YoY growth. Consequently, we have revised our FY25 EPS growth estimate down to 3.8% from an earlier projection of 5%.”
This underperformance has led to a downward revision of the full-year earnings per share (EPS) growth forecast for Nifty 50 companies to 3.8% for FY25, compared to the prior estimate of 5%. The report emphasizes that Nifty 50 companies have faced challenges with slow earnings growth throughout the financial year, with EPS growth recorded at 5.5% YoY in Q1FY25 and dropping to 4.2% YoY in Q2FY25.
With Q3FY25 earnings also falling short of expectations, the overall trend suggests a sluggish financial performance for the year. However, the report expresses optimism regarding Nifty 50 earnings growth in the next financial year (FY26), anticipating an 18.3% EPS growth driven by various factors.
Additionally, the report highlights that the government has successfully implemented tax cuts in the budget while maintaining fiscal discipline. The fiscal deficit for FY25 is now projected at 4.4% of GDP, down from an earlier estimate of 4.5%, and for FY26, it is expected to be 4.8%, reduced from 4.9%.
A key question raised in the report is whether the government is signaling the Reserve Bank of India (RBI) to consider cutting interest rates by keeping the fiscal deficit in check. Lower interest rates could further stimulate economic growth by decreasing borrowing costs for businesses and individuals.
While near-term earnings growth remains weak, the outlook for FY26 appears promising, with supportive government policies, a strengthening rural economy, and increased capital expenditure anticipated to drive growth in the upcoming year.
