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Informist, Wednesday, Dec. 24, 2025

 

MUMBAI – Motilal Oswal Financial Services has characterised as "overblown" the concern that sub-10% growth in annual nominal GDP may hit growth in profits of corporations. The brokerage argued that there are several other factors, including pricing power, cost pressures, and competition, that could affect corporate earnings.

 

"There is modest explanatory power of nominal GDP growth for the broader Motilal Oswal Financial universe's annual net profit growth. Even for a narrower, large-cap universe, i.e. Nifty 50, nominal GDP growth explains about 20% of the profit growth for the observed period (past two decades)," the brokerage said in a report. "Even in a stretch case, the nominal GDP growth explains less than one-third of corporate profit growth. Hence, we believe that one should look beyond the GDP growth trajectory to assess corporate PAT growth."

 

Motilal Oswal expects earnings of Nifty 50 companies to rise 12% on year in the financial year 2025-26 (Apr-Mar) and 15% in FY27. "...revisions in either direction should not be too sharp from here, barring possibly for the net profit of Nifty-50 FY26 PAT," it said. The brokerage is overweight on diversified financials, automobiles, capital goods, information technology services, and telecommunication stocks. It is underweight on energy, staples, metal, and utility companies.

 

The brokerage expects the earnings growth of Indian corporations next year to be strong amid fiscal and monetary measures. These measures helped slow the pace of downgrades in earnings estimates this year and even led to upgrades in estimates over the past few months, the brokerage said.

 

During the last two quarters of FY25, the brokerage had cut its FY27 net profit growth estimates for Nifty 50 companies by 3-4%. Subsequently, it cut growth estimates for Nifty 50 companies by 2% during the first quarter of FY26. There were no significant cuts in the second quarter of FY26--indicating the slowing pace of earnings estimate cuts over a 12-month period. On the positive side, Motilal Oswal raised the FY27 net profit growth estimates for Nifty 50 companies by 0.6% during the December quarter of FY26, indicating hopes of better earnings growth. The recent round of increases in earnings estimates have been better than expectations, the brokerage said.  End

 

Reported by Anshul Choudhary

Edited by Nishant Maher

 

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