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A cautiously hopeful tone prevails in the stock market as March quarter earnings trickle in. Initial earnings suggest that companies emerged from a demand contraction in the quarter, though the recovery remains muted. This indicates that consumer spending is yet to pick up meaningfully, after a tepid third quarter.
Extreme global uncertainty in the last three months depressed exports and hurt businesses, experts noted. A analysis of the first 184 companies that have declared their results shows only a 1.4% year-on-year increase in revenue.
That fares marginally better than the 0.3% drop they reported in the December quarter. Sequentially, revenue rose around 8%, but on a low base.
“After a disappointing Q2 and Q3, our expectation for this quarter (Q4FY25) is so low that the actual numbers are looking either in line, or marginally better than what we expected," highlighted Nikhil Rungta, co-chief investment officer of equities at LIC MF. India Inc. has been reeling under a stubborn consumption slowdown since last year due to minimal government spending, sticky inflation and sluggish wage growth.
However, much has changed, and a recovery seems to be on the way—reflected in India’s 6.2% GDP expansion in Q3 from a seven-quarter low of 5.4% in Q2.
Also read | Retail inflation fell to a six-year low of 3.3% in March. Government spending has picked up since December, even though in select critical infrastructure areas like defence and power sectors.
Meanwhile, experts are hoping to see a revival in urban middle class spending in FY26 after the income tax relief offered in the Union Budget. “Markets are in transition right now. From extreme macro uncertainty, we are now heading towards earnings uncertainty which will likely resolve itself over the next couple of quarters," noted Trideep Bhattacharya, president and chief investment officer (CIO) of equities at Edelweiss Mutual Fund.
India and the US are working on a trade deal that New Delhi hopes will help it skirt the tariff war. It has also set its internal levers in motion through tax cuts and increased spending. But these attempts will take time to manifest themselves in earnings and hence, earnings uncertainty remains, Bhattacharya added.
He anticipates another lacklustre performance in the June quarter (FY26), with gradual improvement likely only in the September and December quarters. “This is, of course, assuming that the global situation is stable," he said. Read this | Moreover, renewed tension between India and Pakistan after a terror attack in Pahalgam, which claimed the lives of 26 people, has further put the market on edge.
Investors are now awaiting clarity on a possible military retaliation from India after the government has shut its borders with Pakistan and withdrew from a water sharing treaty. Amid this looming sense of trepidation, investors might find some comfort in India Inc.’s profit margin expanding 140 basis points in Q4 over last year.
However, sequentially, profit margins remained flat at 14.6%. Despite slowing demand, corporate profits rose at a faster pace of 12% on-year in the March quarter, compared with a 13.
7% growth in the previous three months. Cost-cutting measures and benign raw material prices, particularly in the second half of the quarter, led to improved profitability, particularly for companies excluding the banking, financial services, and insurance (BFSI) sector, noted experts. The BFSI sector also exhibited a similar trend, where despite a 1.
7% on-year fall in total income, the segment has so far reported a 9.2% rise in net profits over last year. Experts noted that while a moderating credit growth weighed on net interest income, banks benefited from exceptional gains in treasury income owing to falling yields of their government bond holdings.
Similarly, non-bank financial companies took advantage of a falling interest rate scenario which reduced their borrowing costs and asset management companies charged higher expenses to make up for their falling assets under management (AUM), resulting in healthy net profits across the board. Also read | “Following the recent re-rating in banking stocks owing to regulatory tailwinds, the broader part of the banking rally is over. The Reserve Bank of India has created a growth conducive environment for all.
Going forward it is about execution. Whoever executes better will be rewarded more," said Bhattacharya from Edelweiss Mutual Fund. Even though the market anticipates regulatory tailwinds to peter out in the near term for BFSI companies, “I expect, financials to do good, IT company results to be divergent and consumer staples to not do well in Q4," said Rungta from LIC MF.
“We might see a couple of percentage points of EPS (earnings per share) downgrade in this quarter (Q4FY25). However, this is unlikely to significantly impact stock prices, as we had already factored in an additional 5–7% cut in our earnings estimates over the past three months, following President Trump’s announcement of tariff implementations," he added. And read |.
