Q1 Earnings: What India Inc signals about the economy

Overall momentum has slowed, with capital expenditure growth remaining tepid and industrial output weakening, as IIP growth falls to an 11-month low.

The earnings trend aligns with macro forecasts suggesting India’s GDP growth may moderate to 6.3–6.5% in FY2026. File/ TNIE graphics

India’s corporate earnings for the first quarter of FY2026 point to a slowing but still resilient economy. Revenue growth for listed companies decelerated to around 4–6%, the slowest pace in nine quarters, reflecting signs of demand moderation across key sectors.

Private sector banks posted subdued numbers, with profit growth slowing to just 2.7% quarter-on-quarter, suggesting muted credit expansion and conservative lending amid macroeconomic uncertainty. The IT sector remained under pressure, with top firms delivering weak revenue and mixed profits. The Nifty IT index has declined sharply from its peak, driven by weak global demand and concerns over US trade policies.

Economic implications for India based on Q1 earnings TNIE graphics

On the brighter side, some sectors showed resilience. Tata Power reported nearly 9% year-on-year growth in net profit, backed by strong performance in renewables. Consumer-focused companies like ITC also beat expectations, buoyed by rural demand and strong sales in packaged food segments. This indicates that domestic consumption, especially in rural areas, remains a key support for the economy.

However, overall momentum has slowed. Growth in capital expenditure remains tepid, and industrial output has slipped, with the IIP growth falling to an 11-month low. Despite these headwinds, leading brokerages note that Q1 results were not as weak as feared, and even upgraded several previously underperforming stocks, signaling cautious optimism.

The earnings trend aligns with macro forecasts suggesting India’s GDP growth may moderate to 6.3–6.5% in FY2026. While there are concerns about export-led sectors due to steep US tariffs and global uncertainties, the domestic economy remains broadly stable, supported by consumption and selective strength in infrastructure and power.

Overall, Q1 results indicate that while Indian companies are experiencing slower growth, they are not under distress. The economy remains on stable footing, but further acceleration will depend on stronger private investment, sustained consumer demand, and the resolution of external trade challenges.