Muted Q3 Earnings Growth Expected for Nifty
According to BofA’s Amish Shah, the third quarter of this fiscal is likely to extend the ongoing earnings slowdown, with the Nifty expected to post another quarter of subdued earnings growth of around 5% year-on-year.
This is sequentially lower than 7% in the second quarter and 11% in the first quarter. The drag remains concentrated, with Financials (+2% YoY), IT (+7% YoY) and Telecom (+35% YoY) together accounting for nearly 60% of overall earnings growth, highlighting the narrow base of recovery.
Strong Performers in Nifty
BofA points to UltraTech Cement, Larsen & Toubro, Bharti Airtel, Maruti Suzuki, and Eicher Motors as standout performers, with earnings growth expected in the 29–40% YoY range.
Industrials and cement benefit from execution momentum and operating leverage, while autos continue to gain from favourable mix and pricing. For more information on industrials and cement, visit our website.
Excluding Financials
Excluding Financials, BofA expects a relatively healthier picture, with Nifty earnings growth of 8% year-on-year, driven by 9% topline growth and broadly stable margins.
The Sensex (ex-financials) is projected to deliver an even stronger 10% year-on-year earnings growth, underscoring the divergence beneath the headline index. To learn more about the Sensex index, click here.
Market Sentiment
Despite pockets of strength, BofA cautions that market sentiment is likely to struggle in the near term, largely due to challenges in Financials and IT, which together command 46% of the Nifty’s weight.
For banks, while loan growth is improving, softer deposit growth and the risk of further rate cuts remain key overhangs. In IT services, easing US rate pressures, improving banking demand and tariff relief are positives, but unlikely to translate into upbeat near-term commentary.
Telecom and Autos
Beyond these, the brokerage expects a stable quarter for Telecom and continues to factor in a headline mobile tariff hike in the second half of calendar year 2026, which should support medium-term earnings visibility.
At the stock level within the Sensex index, BofA expects Eternal, Tech Mahindra, Bharti Airtel, Maruti Suzuki, and Mahindra & Mahindra to post strong growth, while SBI, Power Grid, Axis Bank, Reliance Industries, and ICICI Bank are likely to report weaker numbers.
Outlook
Looking ahead, BofA notes that the Street has already made sharp downgrades to earnings expectations, cutting fiscal 2026 and fiscal 2027 Nifty earnings by 11% and 6% respectively during calendar year 2025.
With consensus growth estimates now closer to BofA’s own assumptions, the brokerage expects earnings cuts to moderate. Growth is likely to accelerate into financial year 2027, supported by a pickup in loan growth for Financials, discretionary spending aided by GST cuts, telecom tariff hikes, stronger non-ferrous metals, and a very low base for IT and Staples.
For more information on GST cuts and their impact on the market, visit our website.
Positioning
From a positioning perspective, BofA remains overweight rate-sensitive cyclicals, including Financials, Real Estate, passenger and commercial vehicles, and regulated power utilities.
It also expects the well-off consumption basket to outperform mass consumption, while continuing to prefer defensives such as Telecom and Hospitals. To learn more about Telecom sector, click here.
The brokerage stays underweight on capex plays, citing limited fiscal headroom for both the Centre and states, which is likely to keep government-led capital expenditure growth meaningfully lower in the near term.
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