Foreign brokerage HSBC said Indian earnings have seen significant downgrades in the past few months, but the latest results indicate this might be over. This supports its overweight on Indian equities.
India earnings has surprised on the upside, HSBC said. It said Indian firms had their best quarter since September 2023. As many as 69 per cent of them either beat expectations or were in line with estimates. Total sales grew 6 per cent year-on-year (y-o-y), and net profits were up 13 per cent y-o-y.
Excluding commodities and one offs, net income grew 8 per cent y-o-y, marking the sixth consecutive quarter of single digit growth. Bank profits moderated on NIM pressure, but credit cost came down. Large banks surprised on upside, leading to a slight upgrade in FY26e earnings.
Consumer was impacted by GST disruptions, yet many saw margin recovery. IT firms beat because of a weaker currency. Guidance is for a demand recovery. Cement, Paint benefited from weaker competition in the sector. Pharma sales were strong. Hospitals faced margin pressure.
HSBC said the the worst is over. After a year of EPS downgrades, Indian earnings for FY26e are now seeing modest upgrades, led by Oil & Gas, Property, Tech and Financials. There have been consensus downgrades in industries such as Consumer Services (Trent, Nykaa), Healthcare (Kims, Dr Reddy’s) and FMCG (Colgate, GCPL).
Management across sectors including banks, tech, consumers, cement and autos guided for a recovery in the upcoming quarters. This supports our overweight on Indian equities. India’s earnings growth recovery is supported by lower inflation, rate cuts and income tax moderation.
Consensus forecasts 10 per cent growth in FY26 and 14 per cent in FY27. We now believe the risk of downgrades in FY27e EPS is limited. Financials are the biggest contributor to the recovery, as margins have bottomed and signs of an uptick in loans are now visible.
It maintained its overweight stance on Indian equities.
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