The July earnings season told a mixed tale for India’s Nifty 50 benchmark index, as a wave of downgrades outweighed some significant upgrades. Though a couple of heavyweight stocks surpassed expectations, others had analysts trim earnings estimates significantly — pulling the broader mood down. Behind the trend were stocks such as IndusInd Bank, Axis Bank, Dr Reddy’s Laboratories (DRL), Tata Steel, and HDFC Life, which collectively spearheaded the Nifty’s earnings downgrades for the month.
As per information from JM Financial, the Nifty saw a month-on-month (MoM) earnings per share (EPS) downgrade of 0.5% each for FY26 and FY27. The slight but earnest decline in EPS estimates is reflective of growing concerns related to the rate of economic revival and specific industry-related issues.
Banks, Pharma, and Metals Drive the Slumps
Worst affected was IndusInd Bank, which saw its earnings estimates cut sharply by 13.4% in July alone. The bank, which had previously benefited from the positivity of credit growth and robust net interest margins, came under pressure as asset quality issues and less-than-expected growth in some segments weighed upon it. Axis Bank, another large private sector lender, also had its FY26 and FY27 earnings estimates cut by 7.5%.
In the pharma sector, Dr Reddy’s Laboratories posted numbers that did not enthuse investors and analysts. The firm witnessed its earnings cut by 6.3%, mainly because of lacklustre performance in major overseas markets and pricing stress in the U.S. generics segment.
Tata Steel, a commodity price-sensitive cyclic stock, was downgraded by 5.4%. Global demand for steel has weakened, led by China, and Tata Steel’s international business is likely to continue to remain pressured over the near term. HDFC Life’s 4.2% downgrade also captured more widespread troubles among insurers in terms of under-pacing growth in premiums and the impact of regulation on margins.
Fewer Downgrades Than in June — Though Outlook Remains Cautious
Despite the torrent of cuts, the ratio of Nifty companies that saw EPS downgrades actually fell in July. According to JM Financial, just 40% of Nifty companies underwent EPS cuts, lower than 44% in June. But analysts issue a warning: this might not be enough to indicate a turnabout yet.
Brokerage Kotak Institutional Equities noted that the FY26 Nifty-50 EPS was reduced by 2% over the previous month, indicating that the earnings environment is still fragile. Kotak was also concerned about earnings quality, particularly for FY26, with construction materials and metals & mining business providing 32% and 25% respectively of the incremental earnings of the Nifty-50 and the KIE universe.
“In essence, some sectors are carrying the heavy load while others are trailing behind. Such a divergence raises concerns about the sustainability of earnings growth,” Kotak said.
The Bright Spots: ONGC, BEL, Reliance, M&M, Shriram Finance
While there were downgrades galore, a handful of stocks provided some hope. ONGC, Bharat Electronics (BEL), Reliance Industries, Mahindra & Mahindra (M&M), and Shriram Finance were among the top Nifty performers in terms of earnings upgrades in July.
ONGC was boosted by cruder-than-expected prices as well as enhanced upstream margins. On the other hand, BEL, a defense PSU, remained in its good run with strong order inflows and good profit margins, which resulted in a positive revision in its earnings forecast.
Reliance Industries, the largest Indian conglomerate, had its EPS estimates increase with increasing petrochemical spreads, retail revenues expanding, and sustained momentum in Jio’s telecom and digital businesses. M&M benefited from better SUV sales and farm equipment sales, while Shriram Finance surprised with better asset quality and robust disbursement expansion.
Macro View: FY25 Slow, But FY26 May Be a Rebound Year
Total, Nifty EPS expansion in FY25 has been estimated at just 1% by Motilal Oswal Financial Services (MOFSL), reflecting a subdued profits year. Nevertheless, the company has hopes of a revival in FY26 with a predicted 10% growth in EPS being driven by fiscal and monetary stimulus policies.
Markets have made a remarkable comeback from the April 2025 lows. While July was weakish, we think better earnings expectations and fair valuations — barring frothy small-cap stocks — will assist the market to squeak through gains,” MOFSL said.
In spite of near-term headwinds, the hope is that structural drivers such as India’s increasing domestic demand, government capex, and the world’s shift towards ‘China Plus One’ manufacturing strategies may offer a base for medium-term earnings expansion.
The July earnings season was an eye-opener for investors, as a number of large-cap stocks did not meet high expectations. The downgrades in marquee stocks such as IndusInd Bank, Axis Bank, DRL, Tata Steel, and HDFC Life indicate increasing caution among market players and analysts alike.
Concurrently, the performance of companies such as ONGC, BEL, Reliance, M&M, and Shriram Finance demonstrates the divergence of corporate India’s performance — and the opportunity that selective investment can still deliver.
As the marketprocesses the contradictory signals of Q1 earnings and revises its forecasts for FY26 and FY27, this much is certain: investors must remain more choosy than ever, as sector-specific risks and macro unknowns continue to define the earnings narrative.
