Morgan Stanley’s latest analysis paints a nuanced picture of India’s corporate landscape, forecasting a challenging earnings season ahead. For the January-March quarter, the investment firm anticipates that the profits of Indian companies might hit a 19-quarter low, largely due to sluggish revenue growth and shrinking profit margins. Despite these hurdles, there’s a silver lining: 90% of sectors are projected to report positive revenue growth.

Earnings Outlook: A Mixed Bag

The outlook for Indian corporates suggests a single-digit dip in profits as uncertainty continues to loom over market estimates. In fact, this quarter marks the first time in two years that margins are expected to contract across various sectors. Revenue growth for key indices like the BSE Sensex and NSE Nifty 50 is pegged at approximately 3%.

Morgan Stanley’s analysts forecast annualized growth rates for revenue, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), profit before tax, and net profit to be 5%, 3%, and 6%, respectively.

Sector Highlights: Leaders and Laggards

Interestingly, while many sectors face challenges, nine out of ten are positioned to show promising revenue growth. The sectors leading this charge include:

• Communication Services
• Industrials
• Healthcare

On the other hand, the energy sector is expected to experience a decline in revenue, contributing to the overall downturn.

Key Players to Watch

• Bharti Airtel Ltd. and Infosys Ltd. are anticipated to be the primary drivers of earnings for the BSE Sensex.
• Conversely, State Bank of India is projected to lag behind, marking it as one of the poorer performers in the upcoming earnings report.

Margin Pressures and Future Projections

The outlook for margins isn’t rosy, with predictions suggesting a decline for eight out of ten sectors. However, both the communication and healthcare sectors might buck this trend and experience margin expansion.

Looking ahead to FY 2026, consensus estimates predict earnings growth to be around 3% lower than Morgan Stanley’s projections. In recent months, these estimates have seen a decline of 2%, settling at 16%, with a breadth of revisions at -4%.

Morgan Stanley projects that the three-year compound annual growth rates (CAGR) for revenue and profit in the Sensex and Nifty 50 indices will reach 8% and 10%, respectively, for the April-June quarter. Notably, the energy and communication services sectors have recorded the most favorable earnings revisions over the last three months.

In this earnings season, Morgan Stanley recommends focusing on select lending, consumer, and industrial stocks for potential opportunities.

For ongoing updates, stay tuned to our financial coverage.