Earnings Surprise, Cautious Outlook Ahead

Q4FY25 earnings have surprised positively so far, but the market's low expectations, fuelled by two lacklustre quarters, had already factored in slow revenue and profit growth. Despite numbers meeting or exceeding expectations, cautious sentiment persists, hinting that broad-based growth may give way to sector and stock-specific performance. Our report breaks down sector-wise performance, spotlighting winners, losers, and industry outlooks [EasyDNNnews:PaidContentStart]

Q4FY25 Earnings Performance and Sector Outlook 

As of May 13, 2025, the results for the quarter ending March of 2025 are largely better than expectation. A total of 793 listed Indian corporates have declared their earnings, revealing a story of diverging growth across sectors. Of these, 544 companies reported a year-on-year increase in earnings, while 249 witnessed a decline during the same period. Aggregate revenue grew by 11.84 per cent, operating profit by 14.14 per cent, and net profit by 19.53 per cent on a year-onyear basis. 

Market participants had braced for subdued numbers amid rising macroeconomic concerns and global uncertainty. With a sharp market correction in February and March 2025, investor sentiment had turned cautious, and the expectations were low even from earnings. However, Q4FY25 results turned out to be better than feared, yet lacking the kind of broad-based strength that could reignite a full-blown rally. The dominant narrative is now shifting from top-down to bottom-up earnings, where sector-specific stories and company fundamentals matter more than ever. 

In this cover story, we decode the Q4FY25 corporate earnings, identifying sectors that delivered, those that disappointed, and where the Indian Inc. might be headed as we enter FY26. 

Selected Companies with High Market Capitalisation That Outperformed in Q4FY25 

Note: The table below highlights companies across various sectors with substantial market capitalisation whose Q4FY25 results exceeded market expectations. 

1. Housing Finance & Microfinance
Mortgage lenders had a strong quarter, with disbursements and loan growth accelerating due to improving macro conditions in southern states like Karnataka and Telangana. Asset quality remained largely stable, with some lenders showing marginal improvements. Home loan demand remained robust despite the elevated interest rate environment, suggesting underlying housing demand remains intact. 

In the microfinance space, topline growth was strong, driven by loan book expansion, but the bottom line at the sector level remained under pressure. While credit demand picked up, asset quality remains a concern due to high slippages, particularly in geographies still facing rural distress. 

2. Pharmaceuticals
The pharmaceutical sector was one of the star performers in Q4FY25. Of the pharma companies that have declared results till May 11, 17 posted profit growth, while only six reported declines. Sector revenue growth stood at a healthy 19.4 per cent. The quarter saw Indian pharma benefit from multiple tailwinds: improved operational efficiency, a weaker rupee (boosting exports), and reduced freight costs. CDMOs (Contract Development and Manufacturing Organizations) played a major role in revenue generation. Export performance, especially to the U.S. and Europe, remained robust. Companies also saw higher traction in complex generics and specialty APIs, providing visibility for growth in FY26. 

3. Chemicals
Large and Mid-Cap chemical companies showed strong revenue and profit growth. With China witnessing reduced chemical output due to environmental curbs and power shortages, Indian players stepped up to fill the supply gap. Demand from agrochemical and specialty chemical verticals remained high, while capacity expansion and backward integration helped manage input costs. Performance is expected to sustain in the coming quarters if export demand remains intact. 

4. Healthcare Services
Nine listed healthcare service providers reported results till May 11, posting a collective 12.9 per cent revenue growth and a strong 17.8 per cent operating profit growth. Growth was driven by strong demand for elective procedures, increased occupancy in hospitals, and improving margins aided by cost efficiencies. Players in diagnostics and premium care segments also benefitted from pricing power and a rise in footfall. 

5. Oil & Gas
The oil & gas sector exceeded expectations, particularly due to stellar performance from oil marketing companies (OMCs). BPCL and IOCL reported better-than-expected numbers on the back of high gross refining margins (GRMs) and improved marketing margins. Inventory gains contributed significantly. Refining throughput remained consistent, and capacity utilization was strong. However, the long-term outlook remains cautious due to global crude price volatility and inventory risks. 

6. Metals
Select metal companies such as JSPL reported revenue beats supported by strong volumes. Operating margins remained flat but steady, supported by favourable pricing in the global markets. Steel producers saw some recovery in export demand, while non-ferrous players remained cautious due to rising trade tensions. 

1. Automobiles
The auto sector’s Q4FY25 was a mixed bag. While companies like Mahindra & Mahindra and TVS Motors posted solid earnings, others struggled with weak rural demand and inventory corrections. Commodity prices, barring rubber, stayed supportive. However, management commentary was guarded, especially for PVs (Passenger Vehicles), which are expected to grow at low single digits in FY26. CV (Commercial Vehicle) demand remained tepid, while the tractor segment continued to hold up well. 

2. Consumer Staples
FMCG companies struggled with tepid urban demand and high inflation in food and agri-commodities. Input cost pressures and limited pricing power dented margins. While rural demand is showing signs of a slow comeback, overall volume growth remained muted. Most companies have turned cautious in their outlook for the near term but expect things to improve gradually with better crop output and easing food inflation. 

3. Banking
Banking results showed a divergence between large private banks and smaller players. While the likes of HDFC Bank and ICICI Bank posted strong earnings supported by stable asset quality and improving margins, SMID (Small and Mid-size) banks faced asset quality issues and limited NIM expansion. 

PSU banks saw mild NIM contraction, but asset quality was broadly stable. Credit growth decelerated, especially in unsecured retail and MSME segments. 

4. NBFCs
NBFCs, especially vehicle financiers, underperformed expectations. Q4 typically sees seasonal strength, but this time asset quality remained tight. Weak government capex and rural distress led to higher collection efforts and increased credit costs. The tractor financing segment performed best, with sustained demand, but CV financing saw persistent weakness. NIMs have not expanded meaningfully yet, and analysts expect consolidation in FY26. 

5. Retail
Retailers had a mixed quarter. Apparel and grocery demand remained subdued, with further deceleration in same-store sales growth (SSSG). Value retail outpaced premium players, indicating that consumer preference is tilting towards affordability. Tier 2 and 3 cities contributed more to revenue, but urban discretionary spending remained cautious. 

1. Capital Markets
Capital market-linked firms struggled with low transaction volumes in January and February, though there was some rebound in March. Flat SIP flows and volatile equity markets affected revenue growth of AMCs (Asset Management Companies). Equity contributions to AUM fell, impacting yield. However, other income improved QoQ due to favourable MTM gains on debt portfolios. Players remain optimistic about FY26, expecting a pickup in inflows if markets stabilize. 

2. IT Services
The IT sector continued to face macro-driven headwinds. Discretionary tech spending remained weak globally due to economic uncertainty. Client budgets were delayed, and deal ramp-ups were slower than expected. While cost controls helped protect margins, revenue growth was muted. Exportfocused mid-caps fared worse than Large-Caps. A weaker exit to FY25 has set a cautious tone for FY26, with most IT players expecting a slow H1 before recovery sets in. 

Sector-wise Outlook
Positive Trajectory 

• Banks 

Most banks expect earnings to bottom out in H1FY26. Liquidity easing and improved credit cost metrics should aid profitability. Growth in corporate lending and a revival in retail demand (especially housing) will be key drivers. 

• Consumer Discretionary

Consumer companies are cautiously optimistic. Price hikes are being implemented in a staggered manner to manage raw material inflation. A good monsoon, lower food prices, and tax incentives could drive both urban and rural consumption. 

• Retail
  Store expansions in Q4 by players like Trent and DMart will boost growth. Demand from tier 2 and tier 3 cities is expected to remain steady. Grocery margins remain under pressure due to high competition, but operating leverage should kick in from FY26. 
   

Cautious Outlook 

• Automobiles

Commodity inflation, weak PV demand, and high base effects are likely to impact performance. Tractor sales remain a silver lining, but broader recovery in CVs and two-wheelers is expected only by H2FY26. 

• Metals

Global volatility in non-ferrous prices amid trade tensions is a concern. Domestic demand remains stable, but export trends need close monitoring. 

• Consumer Staples

Staples may continue to face volume pressure due to cautious consumption. Margin relief could come only in H2FY26 if input prices decline meaningfully. 

With the Q4 base now softening, analysts expect an earnings rebound starting Q1FY26. However, the consensus is that this will not be a broad-based revival. Instead, bottom-up stories and sectoral strength will drive market performance. Corporate India is expected to continue with moderate profit and revenue growth until monetary easing kicks in. The full impact of the rate cut cycle and exemption in income tax announced in the last budget, likely beginning this fiscal, may act as a catalyst for higher economic activity and better corporate performance. 

Conclusion
Q4FY25 was a quarter of consolidation and resilience amid rising uncertainty. While aggregate earnings showed decent growth, the broader market narrative reflects caution. The days of broad-based earnings upgrades seem to be behind us, at least for now. The Indian economy continues to show strength, with GDP growth supporting corporate toplines. However, global headwinds, rural weakness, and delayed capex cycles are acting as near-term brakes. As FY26 unfolds, earnings growth is likely to be more selective and bottom-up in nature. Investors may need to move beyond index watching and dig deeper into sectoral and company-specific fundamentals to uncover alpha. Markets may remain volatile in the short term, but long-term prospects remain intact for India Inc., especially in consumption-driven and policy-backed sectors.

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