India Inc Records ‘Best Quarter’ in Two Years; FY27 Earnings Expected to Grow 14%

New Delhi — Indian companies have posted their “best quarter since September 2023,” signalling that the recent phase of earnings downgrades may finally be ending, according to a report released on Monday by HSBC Global Investment Research.

The report noted that 69% of firms either met or exceeded expectations, with overall sales rising 6% year-on-year, reinforcing the firm’s “overweight” stance on Indian equities.

With the support of lower inflation, anticipated rate cuts, and income tax moderation, the report highlighted consensus estimates projecting 10% earnings growth in FY26 and a stronger 14% growth in FY27.

Financials Lead the Recovery

Financial companies remain the largest contributors to the earnings rebound as margins appear to have bottomed out and loan growth is showing signs of improvement.

In Q2 FY26, net profits for Indian companies rose 13% year-on-year. Excluding commodity-linked businesses and one-off items, net income increased 8%, marking the sixth straight quarter of single-digit growth.

Bank profits continued to moderate due to pressure on net interest margins (NIM), but lower credit costs and stronger-than-expected performance from large banks led to a slight upgrade in FY26 earnings.

Sector-wise Performance

• Consumer goods companies faced GST-related disruptions but many reported margin recovery.

• IT firms outperformed, benefiting from a weaker rupee and expectations of a demand revival.

• Cement and paint companies gained from reduced competition in their sectors.

• Pharma saw strong sales, while hospitals experienced margin pressures.

After a year of earnings-per-share (EPS) downgrades, FY26 forecasts are now seeing modest upgrades—driven by oil & gas, property, technology, and financials. The report stated that this suggests “the worst is over.”

However, certain areas like consumer services, healthcare, and FMCG continued to see consensus downgrades.

Management commentary across banks, technology, consumer goods, cement, and auto sectors indicates a broader recovery in the coming quarters, the report added.

--With inputs from IANS