New Delhi [India]: The Nifty-50 index has posted single-digit year-on-year (YoY) growth in profit after tax (PAT) for the third straight quarter, reflecting a continued slowdown in corporate earnings, according to a report by Motilal Oswal.
For the quarter ending December 2024 (Q3FY25), Nifty registered a modest 5% YoY PAT growth, aligning with market expectations. This marks the third consecutive quarter of muted earnings expansion, a trend last seen during the pandemic-induced slowdown of June 2020.
“A third consecutive quarter of low single-digit earnings growth… This market correction has coincided with a slowdown in earnings growth, as the Nifty-50 has managed only 4% PAT growth in 9MFY25,” the report stated.
Earnings Growth Decline Amid Market Correction
The report highlighted that Nifty-50’s PAT growth in the first nine months of FY25 (9MFY25) stood at just 4%, a stark contrast to the 20%+ compound annual growth rate (CAGR) observed during FY20-24.
Despite the subdued growth, certain sectors, including Banking, Financial Services, and Insurance (BFSI), along with Technology, Telecom, Healthcare, Capital Goods, and Real Estate, contributed positively to the index’s earnings performance. However, the overall trend suggests a loss of profit growth momentum, raising concerns over the sustainability of corporate earnings.
Downgrade in EPS Estimates for FY26 and FY27
The report also noted a cut in Nifty’s EPS (Earnings Per Share) estimates for the coming years:
- FY26 EPS estimate reduced by 1.4% to ₹1,203
- FY27 EPS estimate lowered by 1.8% to ₹1,373 (from ₹1,398)
This downgrade is attributed to sectoral challenges and weaker-than-expected corporate performances in some key industries.
Market Outlook and Investor Sentiment
Analysts believe that sustaining earnings growth amid global economic uncertainties and domestic market volatility will be critical for Nifty-50 companies in the coming quarters.
With investors closely monitoring macroeconomic data, monetary policy decisions, and corporate guidance for Q4FY25, market sentiment is likely to remain cautious.