Stock market struggles: Nifty sees 3rd straight quarter of single-digit growth, earning estimates slashed

Indian stock market has witnessed a sharp weakness in the current calendar year with benchmark indices cracking nearly 4 per cent, while the BSE midcap and smallcap indices cracking 16 per cent and 20 per cent, respectively on a year-to-date (YTD) basis on the back of rising dollar, consistent FIIs outflows and Trump tariff threats. Along with this, quarterly earnings for the India Inc has remained muted, which has led to the brutal dumping on broader market counters.

Domestic brokerage firm Motilal Oswal Financial Services (MOSL) said that 3QFY25 earnings remained modest, with the worst downgrade ratio since the first quarter of the financial year 2020-21 (Q1FY21). The corporate earnings in the recent quarter were largely muted, driven by BFSI, with some positive contribution from technology, telecom, healthcare, capital good and real estate counters.

Nifty50 sees third straight quarter of single digit growth, delivering a 5 per cent YoY profit growth, in line with the estimates, it said, adding the largecap companies’ earnings were in-line, while midcaps beat estimates but smallcaps disappointed. In the midcap space, 87 companies stood out with 26 per cent earnings growth led by financials (PSU banks & NBFCs), commodities (metals and oil & gas) and retail.

As per MOSL’s report, 121 companies were broadly a miss in the smallcap sapce, with earnings dipping 24 per cent YoY and 56 per cent of the companies from its coverage universe missed the estimates. “Nifty EPS estimates for FY26 cut by 1.4 per cent to Rs 1,203, mainly due to ONGC, HDFC Bank, JSW Steel, Axis Bank and SBI. For FY27, EPS estimates are reduced by 1.8 per cent to Rs 1,373 due to downgrades in SBI, HDFC Bank, ONGC, Tata Steel and Reliance Industries,” it said.

According to MOSL’s report dissecting the Nifty50 pack, Bharti Airtel, Hindalco, Tata Motors, Kotak Mahindra Bank and Maruti Suzuki saw top earnings upgrades for FY26, in the range of 3.5-9.2 per cent. On the other hand, JSW Steel, Tata Consumer Products, Tata Steel, Trent and Dr Reddy’s Labs saw top earnings downgrade for FY26E in the range of 5-9.5 per cent.

“We continue to remain biased toward large caps with a 76 per cent allocation in our model portfolio. We are ‘ overweight’ on consumption, BFSI, IT, industrials, healthcare and real estate, while we are ‘underweight’ on oil & gas, cement, automobiles, and metals,” Motilal added.

Overseas investors have dumped local equities worth nearly Rs 1 lakh crore in the year 2025 so far, with dumping stocks for more than Rs 21,000 crore in the first half of February. The current global and domestic economic indicators suggest that the FIIs exodus is likely to prevail in the near future.

BofA Securities said that correction is playing out as expected and CY25 is likely to remain weak for the markets considering the continued earnings downgrades. The overseas brokerage is expecting single digit returns for Nifty50 in the current calendar year. It also sees weak FIIs inflows on the back of strong US bond yields and rich valuations are likely to contract further.

Trivesh D, COO at Tradejini believes that Q3 results have failed to meet expectations, following the trend in recent quarters where both YoY and QoQ performance was poor. The momentum of growth has slowed down due to poorer performance in the industrial commodities and construction sectors, along with muted investment-linked segments, he said.

“The next significant trigger could come from the year-end results, which should offer more clarity on the overall business environment and future direction.  It is evident that market players are in wait-and-watch mode. Year-end results may give clearer indications about the business environment and directions going ahead,” Trivesh D added.