As companies continue to release their financial results for the third quarter of FY25, the overall earnings growth for Nifty 50 firms has remained weak.
According to a report by JM Financial, out of the 50 companies in the index, 26 have reported their Q3FY25 results so far, showing a mere 4.4 per cent year-on-year (YoY) growth.
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This is significantly lower than the earlier estimate of 5.8 per cent growth for the quarter. It said “against our expectation of 5.8 per cent YoY growth (ex-BFSI growth at 2.1 per cent YoY) in 3QFY25, so far the 26 Nifty50 companies that have reported numbers have delivered only 4.4 per cent YoY growth. We have already cut the FY25E EPS growth to 3.8 per cent (from 5 per cent earlier) during 3QFY25 so far”. Due to this slower-than-expected performance, the report has also revised down the full-year earnings per share (EPS) growth estimate for Nifty 50 companies to 3.8 per cent for FY25, compared to the previous estimate of 5 per cent.
The report highlighted that Nifty 50 companies have been struggling with slow earnings growth throughout the financial year. In the first quarter (Q1FY25), EPS growth was recorded at 5.5% YoY, while in the second quarter (Q2FY25), it was even lower at 4.2 per cent YoY.
With Q3FY25 earnings also below expectations so far, the overall trend indicates a sluggish financial performance for the year. Despite the current weakness, the report remains optimistic about Nifty 50 earnings growth in the next financial year (FY26). The firm expects an 18.3 per cent EPS growth in FY26, driven by several factors. The report also notes that the government has managed to introduce tax cuts in the budget without compromising on fiscal discipline.
The fiscal deficit for FY25 is now expected at 4.4 per cent of GDP (compared to the earlier estimate of 4.5 per cent), while for FY26, it is projected at 4.8 per cent (down from 4.9 per cent).One key question raised in the report is whether the government is signaling the Reserve Bank of India (RBI) to cut interest rates by maintaining a controlled fiscal deficit. Lower interest rates could further support economic growth by reducing borrowing costs for businesses and individuals.
While the near-term earnings growth remains weak, the outlook for FY26 appears positive, with supportive government policies, a stronger rural economy, and increased capital expenditure expected to drive growth in the coming year.
