Earnings revisions in August: a first sign of stabilisation
Niharika Tripathi, Head of Products & Research at Wealthy.in, analysed the latest earnings‑revision data for the Nifty 50. While 23 of the 50 constituents received FY27 EPS upgrades – a 46% upgrade rate – the aggregate estimate for the index rose only 0.1% month‑on‑month, following a 0.7% decline in July. FY28 estimates also saw a modest 0.2% rise after a 0.5% fall in July.
The numbers suggest that the pace of downgrades has slowed, but the overall earnings picture remains muted. At the same time, FY27 Nifty EPS estimates are still 9.3% below the August 2025 level, indicating that a large earnings reset has already occurred.
Breadth versus magnitude
The divergence between the high upgrade rate and the small aggregate lift is a key takeaway. More companies are seeing their outlook improve, yet the magnitude of those upgrades is offset by downgrades elsewhere. Cement, for example, saw a 9% rise in FY27 EPS estimates, while consumer and automobile sectors recorded cuts of 4.7% and 2.2% respectively.
This uneven distribution means that earnings recovery is still patchy. Investors will need to watch whether the positive revisions spread to more sectors and translate into larger aggregate gains.
Why the Nifty remains under‑priced
Even with stabilising earnings expectations, the market is still demanding a higher risk premium. Brent crude has crossed $100 a barrel, Indian 10‑year government yields are above 7%, and US Treasury yields have risen sharply. These factors raise import costs, fuel inflation concerns, and reduce the attractiveness of emerging‑market equities.
The result is a balancing act: improving earnings on one side and a challenging macro backdrop on the other. Until the macro variables ease, earnings upgrades alone may not lift valuation multiples.
Sectors with potential upside
Cement, NBFCs, oil & gas, metals & mining, telecom, infrastructure and selected autos show the strongest earnings momentum. Companies like Hindalco, Reliance Industries, JSW Steel, ONGC and Bharti Airtel contributed to an 18% profit growth across the Nifty in the June quarter.
However, a sector’s earnings revision does not guarantee a re‑rating. Investors must be convinced that the improvement is sustainable and that macro risks are easing.
Vulnerable segments
Consumer and automobile sectors, where FY27 EPS estimates fell, remain the most exposed. Banks and metals also show pockets of weakness, with several constituents receiving downgrades. These areas carry a double risk: declining earnings and high valuation expectations.
What would signal a shift to an earnings‑led market?
A clear transition would require multiple concurrent signals: a broader upgrade cycle beyond 46%, meaningful aggregate earnings growth, validation of estimates in Q2 earnings, stabilisation of crude prices and yields, and improving foreign portfolio inflows. Sector leadership would also need to shift towards earnings‑positive segments.
Focus beyond the headline multiple
The Nifty’s headline P/E cannot be taken in isolation. A company trading at a high multiple may still be attractive if its earnings are being upgraded, while a low‑priced stock may remain cheap if its earnings outlook deteriorates. Therefore, investors should pair valuation analysis with sector‑level earnings‑revision trends.
Bottom line
August’s earnings revisions hint at a stabilisation in expectations but do not yet confirm a full recovery. The market remains sensitive to macro headwinds, and only a sustained, broad‑based earnings improvement coupled with a calmer macro environment can shift the Nifty back to an earnings‑driven trajectory.
What to watch next
* Q2 earnings releases for the Nifty 50, especially in cement, NBFCs and telecom. * Movements in crude prices, Indian and global bond yields, and the rupee’s strength. * Foreign portfolio inflows into Indian equities. * Sector‑specific valuation changes as earnings revisions continue to roll out.
These developments will help determine whether the market is moving from a macro‑led correction to an earnings‑led growth phase.