In its latest ‘Strategy’ note, JM Financial highlighted that at the beginning of FY25, the consensus expectation for Nifty 50 EPS growth stood at 15%. However, the actual growth came in at only 3.4%. Similarly, at the beginning of FY26, FY26, earnings were expected to grow 12–15%, whereas actual growth was only 4.5%.
“While Q4 FY26 results have led to an upward revision in our FY27E Nifty 50 EPS growth forecast to 17.1%, the recent track record of earnings downgrades warrants caution,” it said. The domestic brokerage listed out sectors which it expects to do the “heavy lifting” in earnings. These include automobiles (55% YoY growth, 7% weight in Nifty 50 PAT), metals and mining (36% YoY growth, 6% weight in Nifty 50 PAT), NBFC (32% YoY growth, 4.3% weight in Nifty 50 PAT), telecom (44% YoY growth, 3.3% weight in Nifty 50 PAT), and infrastructure (19% YoY growth, 3.2% weight in Nifty 50 PAT). “Private banks with a 31.2% weight in the Nifty 50 and expectations of 13% growth in FY27E form the backbone of this expectation,” it added.
Q4 earnings review
JM Financial highlighted that Nifty 50 EPS growth of 4.4% YoY in Q4 FY26 stood broadly in line with expectations. Excluding financials, earnings growth stood at 1.4% YoY. It highlighted that aviation was the worst performer, with EPS falling nearly 175% YoY. The sectors that instead notched up the highest EPS growth included internet (346%), telecom (38%), cement (32%), consumer retail (28%), utilities (26%), and automobiles (26%).
“Out of the 50 companies in the Nifty50, 32% missed estimates in Q4, whereas 40% beat estimates. Furthermore, if we split the Q4FY26 performance by market cap, we see that the proportion of misses was the largest in small-caps, followed by large-caps and then mid-caps; 33% of small-cap companies missed expectations while the misses were fewer in mid-caps and large-caps at 18% and 29%, respectively,” it added.
For the entire financial year which ended on March 31, 2026, JM Financial said that is had estimated FY26 EPS would grow 12% YoY, but actual growth came in at 4.5% YoY as earnings expectations steadily weakened through the year. “While part of this divergence reflects the impact of Nifty 50 reconstitution during FY26, earnings underperformance across sectors relative to their initial expectations was also a noteworthy factor,” it added.
Which sectors underperformed in FY26?
Key sectors that underperformed in FY26 when compared to their initial PAT growth expectations, according to the domestic brokerage, are banks (3.6% YoY growth vs expectation of 7.1% growth), automobiles (17.5% YoY fall vs expectation of 4.9% growth), pharmaceuticals (9.7% YoY fall vs expectation of 18.8% growth), and consumer (10.4% YoY growth vs expectation of 13.8%).
While automobiles, metals, NBFC, telecom and infrastructure are expected to lift up FY27 earnings, JM Financial estimates SOE banks, utilities and consumer to drag FY27 Nifty 50 EPS.
Also Read | Motilal Oswal highlights broad-based beat on Q4 estimates, lists 6 sectors that exceeded expectations
