India's Corporate Earnings Set for Strong Recovery
After navigating a challenging earnings season, India's corporate sector appears to have turned the corner according to global brokerage firm Jefferies. The analysis indicates that the worst phase of earnings downgrades is now behind Indian companies, setting the stage for a significant recovery through FY26 and FY27.
Jefferies projects 10% earnings growth in the second half of FY26 followed by a robust 16% surge in FY27 as various sector-specific disruptions gradually fade away. This optimistic outlook comes despite a difficult first half of FY26 that was impacted by erratic weather patterns, subdued power demand, slower construction activity, and delayed consumption spending.
Sectors Driving the Recovery Momentum
The brokerage firm identifies cement and telecom as the frontrunners in India's upcoming earnings upcycle. Cement sector earnings are projected to surge by 34% in FY27 as pricing normalizes from multi-year lows following GST-related adjustments. Softer input costs and improved utilization rates, combined with stabilizing construction activity, create the sector's strongest setup in several years.
Telecom ranks as the second-fastest growing sector with nearly 25% profit growth expected in FY27. Jefferies notes that once exceptional one-time gains from FY25-early FY26 are adjusted for, the underlying momentum becomes clearer. Airtel is expected to deliver 74% profit growth in FY26 and 37% in FY27, while Indus Towers shows normalized growth of 14% in FY26 and 7% in FY27.
Broad-Based Recovery Across Key Sectors
Automobile companies, which faced volatility from festival-driven demand and rural consumption swings, are positioned for a cleaner recovery in FY27. Maruti Suzuki's profits are expected to rise about 18% while Samvardhana Motherson could see 30% growth, benefiting from easier comparables and smoother supply chain operations.
The banking sector also features prominently in the acceleration narrative. With net interest margin compression appearing close to its bottom, Jefferies anticipates a more stable operating environment. Kotak Mahindra Bank's net profit is projected to rebound from a 10% decline in FY26 to 22% growth in FY27, supported by an estimated 18-basis-point margin improvement.
Consumption-linked sectors including staples, automobiles, discretionary spending, and utilities may experience an 8-15 percentage point rebound, partly driven by volume increases following recent GST rate cuts and consequent operating leverage benefits.
Revenue Growth and Margin Expansion Outlook
Jefferies maintains that revenue growth will remain healthy at 13-14% in both FY26 and FY27, accompanied by annual EBITDA margin expansion of 20 basis points. The brokerage emphasizes that no major earnings growth acceleration has been factored in for sectors such as financials, energy, IT, cement, and industrials, indicating potential for positive surprises.
The recovery thesis is anchored in a cleaner base and policy support expected to lift key sectors. Jefferies noted that the bulk of earnings swings will likely come from autos, banks, power, and consumer sectors, where low base effects and policy support should drive an uptick.
While pharma may lose some momentum in the second half of FY26 due to a high base created by Revlimid's contribution, the overall earnings picture appears increasingly positive. Jefferies concludes that confidence in 13-15% FY27 EPS growth should support market sentiments, with the next leg of earnings strength expected to be more broad-based and less disruption-driven than the past two years.
