The impact was seen across sectors, with technology darling Tejas Networks, drone manufacturer Ideaforge, luggage maker VIP Industries, cybersecurity firm Quick Heal Technologies, and infrastructure giant GMR Power all joining the loss-makers’ club. Adding to the misery, three small finance banks—Utkarsh SFB, Equitas SFB, and ESAF SFB—tumbled from profitability to losses.
Restaurant chain operator Sapphire Foods, mining company Deccan Gold Mines, hospitality firm Praveg, logistics player Allcargo Logistics, chemical manufacturer Sigachi, and IT services provider Xpro India have also disappointed investors with their shift to red ink.
“The broader market delivered weak earnings for Q1FY26, though trends did not worsen significantly. We see this as the bottom for the cycle, and expect a recovery from 2HFY26, led by consumer discretionary,” said Seshadri Sen from Emkay Global, offering a glimmer of hope. Sen remains bullish with a 28,000 Nifty target for September 2026.
The numbers paint a stark picture: BSE500 profit growth languished at just 9.9%, marking the fifth successive quarter of single-digit expansion. Even more worrying, topline growth remains “worryingly muted” at around 7% for both Nifty and BSE500 companies, according to Emkay’s analysis.
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Phillip Capital’s consensus tracking reveals the extent of the downgrades—38 Nifty companies faced EPS cuts for FY26, with retail and FMCG bearing the brunt across all forecast periods. “Consensus EPS downgrades outnumbered upgrades for FY26/FY27/FY28,” the brokerage noted, highlighting the broad-based pessimism.Motilal Oswal’s universe fared slightly better with 11% YoY growth, but the firm warned that “the trend of a higher number of downgrades continues into this quarter.” The earnings growth was heavily skewed toward oil & gas (+27% YoY) and cement (+51%), while automobiles declined 3%.Nuvama struck a cautious tone, warning that “BSE500 profits have now reconciled with the weak top line.” The brokerage sees limited room for earnings acceleration given “elevated margins” and weak household incomes, potentially capping market upside despite strong domestic flows.
Kotak Institutional Equities is bracing for more pain ahead, stating it doesn’t “rule out further downgrades given persistent weakness in consumption, slowdown in investment, especially government and household spending, and headwinds to exports.”
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What should investors do?
Despite the carnage, analysts aren’t hitting the panic button yet. Emkay’s Sen believes this marks “the bottom for the cycle” with recovery expected from the second half of FY26. Nuvama advocates preferring “large-caps over small and midcaps and consumption over capex given policy support.”
Motilal Oswal said improved earnings prospects and reasonable valuations, barring smallcaps, should enable the market to achieve modest gains.
“We believe that the influence of the US tariff wars on Indian markets will be limited. The Nifty trades at 22.2x FY26E earnings, near its LPA of 20.7x. While our model portfolio bias remains towards large-caps (~70% weight), we have turned more constructive towards mid-caps (with 22% weight vs. 16% earlier) owing to better earnings delivery and improving prospects,” it said.
The brokerage firm is overweight BFSI, consumer discretionary, industrials, healthcare & telecom, and underweight oil & gas, cement, real estate, and metals.
(Data: Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)