Mumbai (Maharashtra) [India] – Nifty’s earnings per share (EPS) is expected to grow by a modest 2% year-on-year (YoY) in the third quarter of FY25, according to a report by Nuvama Research. This reflects a slowdown compared to the 4% growth recorded in the first half of FY25, raising concerns about achieving the mid-teens growth consensus for the second half of the fiscal year.
The report stated, “Nifty EPS is likely to grow 2% (versus 4% in H1FY25) — posing downgrade risks to H2FY25 consensus estimate of mid-teens growth.”
The slowdown in earnings growth is attributed primarily to weaker demand rather than external or liquidity shocks, which makes the recovery more challenging without significant policy interventions. “The more worrying aspect is that a slowdown in earnings is now being led by demand rather than external/liquidity shock,” the report noted.
For the full fiscal year and beyond, the consensus forecast for Nifty earnings stands at ₹957 for FY24, ₹1,040 for FY25, and ₹1,240 for FY26. However, the slower-than-expected growth in H2FY25 poses a downside risk to these estimates, particularly as the market grapples with record-high valuations and tightening liquidity conditions.
The report warned, “Reversing the trend shall need a significant policy response, which at present is not on the anvil.”
Market Strategy
The report advised a defensive investment strategy, favoring sectors such as private banks, insurance, telecom, pharmaceuticals, consumer goods, cement, and chemicals. Conversely, it remains underweight in industrials, metals, power, public sector banks, and non-banking financial companies (NBFCs).
Amid the uncertain macroeconomic environment and slowing earnings, Nuvama Research cautioned investors to prepare for heightened market volatility in 2025.
The findings underscore the importance of adopting a cautious and diversified approach in navigating the current market challenges.