The current landscape of the stock market showcases a growing disparity between the Nifty 50’s performance and its projected earnings. Recent analysis from JM Financial highlights a concerning trend: while the index has appreciated by 7.7% over the past year, earnings per share (EPS) forecasts for fiscal years 2025 and 2026 have been notably reduced by 5.1% and 6.8%, respectively. This phenomenon indicates increasing trepidation regarding the earnings trajectory for the ongoing fiscal period.

Earnings Downgrades Intensify

In April 2025, the downgrades in EPS estimates accelerated compared to earlier months. Notably, while there was a minor uptick of 0.3% in FY25E estimates, forecasts for FY26 and FY27 were lowered by 1.1% and 1.0%. JM Financial attributes this modest increase to subdued expectations for the Nifty’s 4QFY25 profit after tax (PAT) as the earnings season approaches.

Key Highlights:

• 70% of Nifty50 companies faced EPS cuts in April 2025.
• The most significant downgrades were in the banking sector, where four out of six firms reported cuts.
• IT services companies faced universal reductions in their EPS estimates, as did all eight consumer sector firms in the Nifty50.

Sectors Feeling the Pinch

The downgrade cycle remains pronounced, with declines in FY26 estimates being sharper than those observed in previous months. For instance, February saw cuts of 0.9% and 0.6%, while March recorded reductions of 0.2% and 0.6%. In contrast, sectors such as NBFCs, telecom, and oil & gas experienced positive movements, with upgrades of 1%, 0.8%, and 0.3%, respectively.

Breakdown of EPS Movements:

• IT Services: -4.5%
• Consumer Goods: -2.5%
• Automobiles: -2.1%
• Metals & Mining: -1.3%

Conversely, twelve companies within the Nifty50, accounting for 24% of the index, saw upgrades in their FY26E EPS estimates, particularly in the automobile and banking sectors.

Individual Stock Performance

When examining individual stocks, some of the most significant EPS cuts were recorded for Eternal, IndusInd Bank, Infosys, TCS, and Maruti Suzuki. On the flip side, the largest upgrades were seen in Kotak Mahindra Bank, SBI Life, Jio Financial, Reliance Industries, and ICICI Bank, reflecting a mixed but cautious outlook in the market.

As the earnings season unfolds, investors remain vigilant, keeping a close eye on these trends to gauge the overall health of the market and make informed decisions moving forward.