Indian companies posted a surprise
earnings beat for the three months ended March, as domestic
activity hummed along boosted by consumption tax cuts and easy
monetary policy, but the Iran war-led energy shock is expected
to weigh on profitability.
As Indian markets slip to seventh place in market value
rankings amid a record foreign fund exodus, analysts warn that
elevated oil prices and supply chain disruptions linked to the
three-month-long Iran war threaten to derail the fragile
recovery in corporate earnings.
India’s top-50 listed companies posted single-digit percent
profit growth for the eighth straight quarter.
Net profit of Nifty 50 firms rose 6.6 per cent year-on-year
in the three months ended March 31, according to Kotak
Institutional Equities, comfortably ahead of forecasts of a 2 per cent
growth.
Banks and financial companies, metal
producers and oil marketing companies
drove much of the earnings growth.
While stable asset quality and improving credit growth
helped lenders, metal firms got a boost from rising global
prices, and oil refiners enjoyed favourable margins.
Firms beyond the blue-chips also did well.
Nomura’s universe of 256 companies posted a profit-after-tax
rise of 18 per cent, while 359 companies tracked by Motilal Oswal
delivered a 16 per cent growth. Both these lists include Nifty 50
constituents.
Mid-cap firms’ earnings grew about 35 per cent, while those for
small-caps advanced nearly 20 per cent, significantly outpacing larger
peers and helping wider market indexes outperform benchmarks.
While earnings of automobile and telecom companies improved
during the quarter gone by, IT firms’ revenue growth stayed
tepid amid mounting concerns over AI-driven disruption and
pharmaceutical companies grappled with weakness in the U.S.
generics market.
Cement, consumer staple and durable goods makers showed
signs of pressure from rising raw material and freight costs.
Dark clouds ahead
The path ahead for Asia’s third-largest economy could be a
rough one as the energy shock starts rippling across the
economy, hurting activity and raising prices.
“Q4 may have marked a temporary relief, but does not yet
signal improved momentum for quarters to come,” Bernstein said,
adding that persistently high commodity prices could pressure
both corporate profitability and broader economic conditions.
A prolonged period of elevated crude prices could squeeze
corporate margins, worsen the macroeconomic outlook and
complicate monetary policy for a country that is the world’s
third-largest importer and consumer of crude oil.
Those concerns are already feeding into forecasts.
“Notwithstanding strong earnings for 4QFY26, consensus
earnings estimates for FY27/28 have been revised lower,” Nomura
analysts led by Saion Mukherjee said, reflecting growing
concerns over oil, commodities and the broader fallout from the
Iran conflict.