Nifty 50 firms have achieved just 4% PAT growth in the first nine months raising concerns
Corporate India is struggling with earning growth issues and may not end FY2025 on a high note. With three-quarters of single-digit profit after tax (PAT) growth and macroeconomic uncertainties impacting industries. So, the question arises of whether Corporate India can regain momentum in 2025. The pressures may continue in the short term. However, a possible turnaround in FY26 is possible, supported by policy turns, interest rate cuts, and a change of government priority towards consumption-driven growth.
Sluggish FY25 Growth: A Reality Check
FY25 has not been an easy year for India Inc. Nifty 50 firms have achieved just 4% PAT growth in the first nine months of the financial year, the weakest earnings growth since the pandemic-related slump in 2020. The main reasons for this slowdown are poor consumer demand, weakening commodity prices, and conservative management expectations. The downward revision of earnings per share (EPS) estimates also indicates the trouble ahead, as corpospendingrofitability lags behind market valuations.
One of the biggest areas of concern has been the underperformance of the consumption economy. Inflation during the initial half of FY25 had already slowed consumer expenditure. Even with the recent easing of inflation by 3.61% in February 2025, the demand has not recovered. This has been a concern for corporations, especially in sectors like automobiles, retail, and fast-moving consumer goods (FMCG).
Moreover, the slowing of the capital spending cycle is also affecting growth in sectors like infrastructure, engineering, and construction. As the government also changed the focus from raider capitalism to demand-led growth, private sector investment has yet to pick up the pace as needed.
Sectoral Challenges and Pockets of Resilience
The overall corporate environment is weak, although some sectors have proved to be resilient. The financial and banking sector has been able to maintain growth on the back of declining non-performing assets (NPAs) and a steady credit cycle. Private sector banks like HDFC Bank, had faced the brunt of post-merger consolidation. They may see a revival in the coming quarters.
The IT industry, which is greatly exposed to world demand, is subject to uncertainties from geopolitical tensions and a slowdown in the US economy. Irrespective of this, digital transformation and AI-based services are still opening long-term growth opportunities.
Pharmaceuticals, yet another industry exposed to the world, is subject to price pressures in major markets such as the US but is still a safe bet because of robust domestic demand and rising healthcare spending.
Commodities such as metals and oil have experienced a steep fall in prices, impacting profitability for firms in these sectors. Reduced global trade and industrial activity have also contributed to their misfortunes.
What Could Drive a Turnaround in FY26?
Even with the current slowdown, experts anticipate FY26 to witness a turnaround in earnings growth due to several reasons:
Policy Support and Interest Rate Cuts
As inflation subsides and the Reserve Bank of India (RBI) closely monitors economic indicators, imminent rate cuts in the months to come can give a boost to corporate earnings. Reduced interest rates will soften the cost of financing for companies, thus making investment in growth and new projects more appealing.
Reopening of Consumption Demand
A change of government emphasis away from capex-led growth toward increasing consumption will be expected to support industries hitherto battered. Policy responses in the form of tax reductions, rural spend boosts, and wage increases are likely to resurrect demand, particularly in consumer-related sectors.
Valuation Corrections and Catch-up in Profits
Corporate profits have not been able to support premium valuations in the stock markets, and hence corrections in major indices have taken place. However, as earnings pick up pace in FY26, domestic and foreign investors may take an interest again.
Global Economic Stability
The performance of export-oriented sectors like pharma and IT will depend upon how global markets stabilize in the next few months. If the European and US economies can stay away from deep recessions and trade tensions subside, these sectors may witness a revival in demand, favourably impacting corporate earnings in India.
Revival in Private Sector Investment
Though private investment has been sluggish, any indication of resumption of corporate expenditures on capacity augmentation, technological improvement, and new business ventures may give a big boost to overall earnings expansion.
Will Corporate India Regain Momentum?
The recovery journey for Corporate India will not be easy. Even as FY25 is likely to close with one of the weakest earnings growth rates in recent times, the projection for FY26 seems positive. It will only be possible if macroeconomic stability continues, policy measures deliver the correct output, and corporate profits match valuations. Corporate India may pick up speed during the upcoming fiscal.
However, issues like geopolitical risks, volatile commodity prices, and shifts in global monetary policies can still affect India’s corporate earnings path. Yet with a good domestic policy and a pick-up in consumption, the sector can expect to come out even stronger in FY26.
