Bleak show! 72% of Nifty 50 companies experience EPS cuts in January

The EPS cuts for Nifty 50 companies, which began during the second quarter of the current fiscal year, have persisted into the December quarter, driven by a moderate set of numbers, prompting analysts to further reduce their earnings multiples to incorporate weaker-than-expected revenue growth, margin pressures, and cautious management outlooks for the coming quarters.

Modest earnings growth was once again driven by BFSI, with positive contributions from technology, real estate, healthcare, and capital goods. Conversely, earnings were weighed down by global cyclicals such as oil & gas, along with metals, cement, automobiles, and consumer sectors.

As expected by analysts, 3QFY25 earnings aligned with modest expectations. However, forward earnings revisions are the weakest in recent times, with downgrades far outpacing upgrades.

According to domestic brokerage firm JM Financial, from January 2024 to January 2025, the Nifty 50 registered an 8.2% increase, while FY25E and FY26E EPS estimates were cut by 5.7% and 4.4% to ₹1,045 and ₹1,200, respectively.

Interestingly, the brokerage’s analysis showed that the Nifty 50 is currently trading at similar valuations—19.6x/17.2x for FY26E/27E—as it was a year ago at 19.7x/17.2x for FY25E/26E.

According to the brokerage, January witnessed a significant downward revision in Nifty 50 EPS of 1.4%-2.8% over FY25E-27E, clearly indicating that companies are missing 3QFY25 expectations. This is similar to October 2024, when post-2QFY25, the Nifty 50 saw a 0.8%-1.8% downward revision over FY25E-27E.

36 Nifty50 companies saw a cut in FY26E estimates

In January, 12 Nifty 50 companies saw an upgrade in their FY26E EPS estimates, with key sectors such as Pharmaceuticals and Autos leading the gains. However, EPS cuts significantly outnumbered upgrades, with 36 or 72% of Nifty 50 companies witnessing downward revisions. 

The most affected sectors included Consumer, Banks, IT Services and Metals & Mining. Industrials, Pharmaceuticals, and IT remained relatively immune to EPS cuts in January 2025, with reductions of less than 1%.

However, sectors that witnessed more than a 5% decline in EPS estimates included Insurance and Metals & Mining, as per the JM Financial report.

“Nifty EPS growth in 1HFY25 was tepid with only 5.5% and 4.2% YoY growth in 1QFY25 and 2QFY25, respectively. Further, against our expectation of 5.8% YoY growth (ex-BFSI growth at 2.1% YoY) in 3QFY25, so far, the 26 Nifty50 companies that have reported numbers have delivered only 4.4% YoY growth. We have already cut the FY25E EPS growth to 3.8% (from 5% earlier) during 3QFY25 so far,” said the brokerage.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.