With Q3 earnings season behind, JM Financial has come out with a review note, suggesting half of smallcaps that it covers missed the Dalal Street estimates, quite a bit. Largecaps, on the other hand, reported better-than-expected results on muted expectations, the brokerage suggested.
The domestic brokerage said smallcap performance lagged largecaps and midcaps in Q3, with 50 per cent of smallcaps missing its expectations. The misses were lower in midcaps and largecaps at 34 per cent and 28 per cent, respectively, it said.
"Out of 280 covered companies by the JMFL research team, 41 per cent of companies missed estimates, while 33 per cent beat expectations. 80 per cent of Hotels missed 3Q estimates, followed by 75 per cent of Building Material 73 per cent of Consumers, 75 per cent of Telecom, 67 per cent of IT and 67 per cent of Metals & Mining beat 3Q estimates," JM said.
On the flip side, the Q3 growth for Nifty50 at 8.9 per cent was ahead of expectations of 5.8 per cent YoY. With 9MFY25 EPS growth at 7.8 per cent, the asking rate for 4QFY25 seems reasonable at 3 per cent, the brokerage said.
"For FY26E, we forecast a 17.2 per cent YoY Nifty50 EPS growth and expect automobiles, IT Services, oil & gas and banks to do the heavy lifting," it said.
JM said a total 29 out of 50 Nifty firms beat estimates; results for four came in line while 17 missed its estimates. In the midcaps it tracks, 24 beat estimates, 18 results were in line and 22 missed estimates. A total of 70 of 140 smallcaps missed JM's estimates, 43 beat and 27 came in line with estimates.
JM said its Nifty EPS estimate for FY25 and FY26 have been reduced by 0.7 per cent and 1.8 per cent, respectively. Its Nifty50 EPS growth estimate for FY25 now stands at 4.2 per cent against 5.1 per cent. For FY26, EPS growth estimate now stands at 17.2 per cent against 18.6 per cent earlier. These cuts were made despite Nifty's Q3 performance being stronger than expected.
In the broader BSE500 (excluding-OMCs), growth remained weak at 8 per cent YoY with most sectors—barring BFSI—posting a sharp slowdown. This is because input price tailwinds have faded while top line remains weak, Nuvama said.
That said, the earnings downgrade cycle appears to be concluding for Nifty, with consensus estimates for FY26 already adjusting downward by 3.9 per cent since January 2025, Emkay Global said in another note. This brokerage remains constructive on mid-teens earnings growth for FY26, driven by Financials, metals, and energy.
It forecast Nifty at 25,000 by December 2025 and suggested FPI selling to abate by Q2 2025.