India Inc.’s Q4 FY25 earnings season was broadly in line with Street expectations, reflecting subdued growth and offering limited optimism for a near-term recovery. Companies in the BSE-500 index posted a 8.7% year-on-year (YoY) increase in net profit, while the Nifty 50 companies reported a more modest 3.7% growth in net income.
The fourth quarter was marked by modest operating performance across most sectors and muted commentary from company managements. This suggests that a strong revival in credit, consumption, or investment demand is unlikely in the immediate future.
According to Kotak Institutional Equities, the earnings before interest, tax, depreciation and amortization (EBITDA) of Nifty 50 companies grew by 9.2% YoY in Q4. For the full fiscal year 2025, net income and EBITDA of the Nifty 50 rose by 6.4% and 4.5%, respectively.
Valuations Remain in Neutral Territory
The Nifty 50 is currently trading at 20.2 times one-year forward price-to-earnings ratio (PER), slightly below its five-year average of 21.7x. This positions the market in a relatively neutral valuation zone.
“Markets could see a phase of consolidation in the near term, as the percentage of BSE200 stocks trading above +1 standard deviation from their long-term average has increased significantly — from 10.6% to 30.3%,” said Seshadri Sen, Head of Research and Strategist at Emkay Global Financial Services.
He added that while near-term global and geopolitical concerns have largely played out, a constructive trade agreement with the US could offer support. Emkay Global has maintained its Nifty 50 target of 26,000 for March 31, 2026, based on a long-term average PER of 20x on FY27 estimated EPS of 1,304.
Meanwhile, Kotak Institutional Equities highlighted the Indian equity market’s current dilemma — caught between high valuations, domestic growth challenges, and global macroeconomic headwinds on one side, and the hopes of an eventual recovery in economic and earnings growth on the other.
“We observe stretched valuations across most sectors and stocks—barring BFSI and a few exceptions — against a backdrop of weak volume growth and increasing disruption risks,” Kotak said in a note.
Market Outlook
Seshadri Sen remains constructive on the broader markets. While concerns around reciprocal tariffs have largely eased, he expects investor attention to shift toward the progress on bilateral trade agreements.
“We forecast Nifty EPS growth of around 12–13% in FY26. Green shoots of recovery in discretionary consumption may emerge as the impact of monetary easing becomes more pronounced. The market witnessed a V-shaped rally following the tariff pause, and we expect the beta rally to continue. Any meaningful correction should be considered a buying opportunity,” Sen said.
He views current Nifty 50 levels as fundamentally justified, with scope for further upside as the earnings cycle begins to inflect. Supportive monetary policy — characterized by rate cuts, liquidity support, and relaxed lending norms — provides additional comfort.
Emkay Global maintains its overweight stance on the Discretionary, Technology, and Telecom sectors, reflecting confidence in their growth potential amid an evolving macroeconomic landscape.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.