Nifty Q3 results: Another round of EPS downgrades ahead?

As the December quarter (Q3) results season looks all set to kick off this week, stock analysts are largely expecting a single-digit growth for Nifty consituents, which could pose a threat to H2FY25 consensus earnings projections. Nuvama Institutional Equities in its Q3 earnings preview note expected Nifty earnings growth to stay modest at 2 per cent for the December quarter against 4 per cent for the first half of the ongoing financial year. The domestic brokerage noted that the Street is expecting a mid-teen growth in H2.

Antique Stock Broking too sees a soft quarter. Excluding financials, telecom, cement & commodity stocks, it expects revenue to growth at 10 per cent, Ebitda at 8 per cent and profit at 6 per cent YoY in 3QFY25. The overall margin is likely to remain flat at 20.4 per cent, this brokearge said.

The more worrying aspect, Nuvama said, is that a slowdown in earnings is now being led by demand rather than external/liquidity shock. Hence, reversing the same would require a significant policy response, which at present is not on the anvil. 

This along with elevated valuations and tightening liquidity warrant caution, Nuvama said as it maintained a defensive bias.

"This combination of slowing earnings amid record high valuations (BSE500 P/B: 4.2 times) and tightening liquidity warrants caution. Investors shall need to brace for volatility in 2025. We have a very defensive bias in our portfolio. Key OW: Private banks, insurance, telecom, pharma, consumer, cement and chemicals; and key UW: Industrials, metals, power, PSU banks and NBFCs," it said.

Nuvama sees revenue and Ebitda for Nifty companies to grow at 5 per cent each in Q3. 
  
"Among sectors, we expect strong operating profit growth in agrochemical, PSU banks, oil marketing companies (OMC), consumer durables, industrial and retail; while cement, paints, infrastructure, private bank and FMCG are likely to be laggards," Antique said.

This brokerage anticipated an earnings per share (EPS) CAGR of 15 per cent for Nifty 50 over FY25-27E and suggested a March 2026 Nifty 50 target of 26,500 based on 19 times FY27 EPS.