Net income for Nifty 50 Index firms likely rose 1.1% in the three months through Dec. 31 from a year earlier, according to analyst estimates compiled by Bloomberg. That would be the slowest pace in five quarters, weighed down by deteriorating margins for banks — which have more than 30% weight in the index.
The upcoming earnings season will test Indian companies’ recovery momentum after a run of single-digit profit growth in recent quarters. It will set the tone for the current year’s earnings expectations, with investors looking for signs for a turnaround in local equities, which are facing foreign outflows amid a delay in the India-US trade deal.
“Earnings are likely to stay soft,” Nuvama Institutional Equities strategists Prateek Parekh and Priyanka Shah wrote in a note. “Going ahead, while a weak rupee and domestic easing could result in a modest top-line recovery, slowing global trade and margin compression pose risks to earnings recovery.”
Bloomberg
India has had a bruising start to the year, with the Nifty 50 falling 1.7% so far in 2026, compared with MSCI Asia Pacific Index’s nearly 3% advance. Indian equities trailed their Asian peers last year by the most since 1998 after missing out on an AI-driven rally in tech stocks.
While market watchers have been eyeing a recovery this year, delays in an earnings pickup and punitive US tariffs are dampening investor sentiment and negating the impact of lower interest rates and tax reductions. The earnings season kicks off Monday, with IT bellwether Tata Consultancy Services Ltd. reporting its results.
Investors are preparing for more stock volatility than in previous two reporting seasons. As of Friday, their options bets implied an average move of 2.7% on earnings for Nifty 50 companies, compared with a record low of 2.3% at the start of the prior quarter’s results. This is happening as the NSE Volatility Index — which uses equity option prices to measure expected market swings over the next 30 days — rebounds from an all-time low.
Companies in the financial services sector, which make up for almost 30% of India’s $5.2 trillion equity market, are seeing margin compression and renewed pressure on asset quality, raising concerns over their earnings growth.
Shares of HDFC Bank Ltd., the country’s biggest private lender, are down 5% so far in 2026, after rising for 12 straight years. Bajaj Finance Ltd. has fallen 12% from its October peak amid worries over the shadow lender’s ability to further accelerate the pace of loan growth.
“The market needs to navigate the next few months of earnings outcomes and macro cues before a more durable growth trend can emerge,” Rajesh Palviya, head of research at Axis Securities, wrote in a note. “The third-quarter results will likely reinforce a phase of consolidation.”