How have IT stocks performed recently?

The Nifty IT index is currently in a deep bear market, down 25% from its peak. However, Jefferies has upgraded the sector to 'Neutral', citing attractive valuations and potential for a near-term tactical bounce.

Which Nifty companies have reported strong Q1 earnings?

Motilal Oswal reported that earnings for the 38 Nifty companies that have reported so far grew 7.5% year-on-year, led by a handful of heavyweights like RIL, HDFC Bank, ICICI Bank, and JSW Steel.

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IT Stocks Bounce Back Despite Gloomy Earnings Outlook

Q: What is the current outlook for Nifty earnings?

Jefferies' mid-quarter review shows that earnings downgrades (50%) have outpaced upgrades (40%) for FY26 estimates across 113 companies, with banks driving most of the cuts. Nifty EPS for FY26 has been cut by 1.1% to Rs 1,110.

4 Aug

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Summary

Jefferies upgrades IT sector to 'Neutral' despite single-digit EPS growth
Nifty EPS for FY26 cut by 1.1% to Rs 1,110 due to earnings downgrades
Motilal Oswal reports 7.5% YoY earnings growth for 38 Nifty firms

IT Stocks Bounce Back Despite Gloomy Earnings Outlook

According to Jefferies' mid-quarter review, earnings downgrades (50%) have outpaced upgrades (40%) for FY26 estimates across 113 companies in its coverage universe. The 'beat' ratio remained flat quarter-on-quarter at 44%. Earnings estimates for MSCI India have been trimmed by 1.7% during the results season, and 8% earnings growth is now expected. Banks were the key reason for the downgrade.

However, the brokerage has upgraded the Nifty IT index, which is currently in a deep bear market, down 25% from its peak. Jefferies believes that while it remains concerned about the long-term stock performance of IT companies due to the single-digit EPS growth outlook, the conditions are ripe for a near-term tactical bounce, supported by attractive valuations relative to the Nifty, free cash flow, and under-ownership.

Meanwhile, Motilal Oswal noted that earnings for the 38 Nifty companies that have reported so far grew 7.5% year-on-year, beating estimates of 5.7% YoY. The upside was led by a handful of heavyweights, including RIL, HDFC Bank, ICICI Bank, JSW Steel, Bajaj Finance, L&T, and M&M. Conversely, several key names, such as Coal India, IndusInd Bank, HCL Tech, Kotak Mahindra Bank, Axis Bank, and Eicher Motors, dragged Nifty earnings lower.

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