India Inc set for strong Q2 earnings despite inflation, cost pressures
India's corporate earnings season kicks off this week with Tata Consultancy Services reporting on Thursday, and analysts expect robust numbers across the board. Kotak Institutional Equities estimates adjusted net profits for the Nifty 50 universe could rise 21% year-on-year in Q2FY27, driven by a nearly 22% jump in revenues and a 21% increase in EBITDA. The firm projects full-year FY27 earnings for the index at ₹1,227.
What is driving the strong earnings outlook?
The optimism rests on several pillars. Auto companies are likely to be the star performers, with volume growth exceeding 20% for the quarter. GST rate revisions effective in late September 2025, which brought hefty price cuts, continue to stimulate demand. Higher average selling prices and a better product mix should further boost revenues. However, rising commodity costs could squeeze operating profit margins. Exporters, meanwhile, stand to gain from the weaker rupee.
How are banks and financial services expected to perform?
Loan growth at both banks and shadow lenders remains strong at 12-14% year-on-year, according to advance estimates. Stable lending yields should lift top lines, though non-interest income may suffer from lower treasury incomes. Net interest margins are likely to stay flat or contract slightly on a sequential basis, depending on the quantum of FCNR (B) deposits mobilised. Overall, the industry should report low-double-digit earnings growth.
What about consumer staples and durables?
The consumer staples pack should deliver double-digit revenue growth, supported by price hikes, stable demand, and a helpful base for some. Volumes are estimated to have increased 7-10% year-on-year. Gross margins for several firms could contract due to commodity inflation, though price increases may offset some impact. Operating profits should be good, but advertising spends and leverage levels will influence final numbers.
Consumer durables are also expected to post good revenue growth, benefiting from better pricing despite subdued volumes. Comparisons are tricky as last year's festive season started earlier. Analysts note possible pre-buying in white goods ahead of the festive season, though not significant. Raw material inflation could leave operating margins flat or only slightly better. At apparel retailers, performance will be mixed, driven by store additions and price increases; same-store metrics may not impress across the board. Value fashion players are believed to have fared better in a highly competitive environment.
Why is the IT sector expected to remain dull?
Another quiet quarter looms for IT services, as discretionary demand stays subdued with no meaningful improvement. Analysts point to AI deflation becoming more apparent, visible in the base business. Revenues could remain flat or rise marginally, while margins for top-tier companies are expected to stay stable or contract year-on-year. The rupee depreciation will help cushion weak pricing. Mid-tier firms should report better numbers than their larger peers.
How is the cement sector shaping up?
Cement demand is estimated to have risen 9-10% year-on-year in Q2, reflecting reasonably good volume growth. Prices have been stable across the country, adjusting for GST rate cuts. Despite some weakness in the east and south, blended realisations should be flat or marginally higher. However, higher fuel and freight costs may have eaten into margins.
Overall, the earnings season promises a mixed but largely positive picture, with autos and consumer names leading while IT lags. Investors will watch for commentary on inflation, demand sustainability, and the impact of global trends on Indian corporates.