Combination income of 182 corporations which have declared first quarter outcomes thus far confirmed a marginal enchancment to rise 5.4% year-on-year (y-o-y), a Mint evaluation confirmed. Internet earnings, nevertheless, zoomed 23%, as uncooked materials prices fell 14% over the 12 months, the steepest decline in eight quarters.
Uncooked materials prices have been additionally 15% decrease than within the March quarter, the sharpest sequential decline since Q1 FY22.
This implies Indian producers are benefiting from enter value deflation. India’s wholesale value inflation index rose 0.4% in April-June, in contrast with 2.4% within the earlier quarter.
Benign crude oil and metallic costs attributable to fears of a worldwide demand slowdown and US-led tariff considerations have lowered manufacturing prices for companies, mentioned Simranjeet Singh Bhatia, senior analysis analyst at brokerage agency Almondz World. “Dumping of low cost chemical substances from China has additionally been a key issue.”
For non-financial corporations, cheaper uncooked supplies boosted the Q1 FY26 revenue margins to 13.8%, a degree not seen since This fall FY21. The evaluation had 144 corporations exterior the banking, monetary providers and insurance coverage (BFSI) sectors. It revealed a stark distinction: whereas annual topline development hit a seven-quarter low of 0.85% in Q1, web revenue surged 40%, marking its quickest development in 12 quarters.
The sequential distinction is much more pronounced. Regardless of a 7% fall in income, earnings rose 5% over This fall FY25, aided by a decline in uncooked materials bills. Expressed as a share of web gross sales, enter prices hit a multi-quarter low of 40.6%. This gave corporations extra monetary flexibility in Q1 to soak up increased worker bills, which rose to a 17-quarter excessive of virtually 18% of web gross sales, the evaluation confirmed.
Whereas worker prices are usually increased within the first quarter attributable to yearly value determinations, the rise of their share in complete prices over the earlier quarter (This fall FY25) was the very best because the corresponding interval in FY21.
These numbers counsel company wage development developments might enhance within the June quarter.
Whether or not the bump in company wages could be significant sufficient to supply a much-needed fillip to city demand continues to be unclear, however it will undoubtedly provide assist to latest measures undertaken to spice up customers’ disposable revenue, mentioned Manish Jain, head of fund administration at Centrum Broking.
“Latest coverage measures like revenue tax breaks, rate of interest cuts and liquidity injections ought to result in demand revival by Q3 (FY26),” Jain mentioned. “Nonetheless, we expect one other two-three share level minimize in earnings estimates for FY26, primarily based on Q1 outcomes thus far.”
Specialists now anticipate round 10% y-o-y earnings development for the Nifty 50 corporations in FY26 as they think about no less than one other quarter of sluggish demand in the course of the 12 months. In such a state of affairs, “benign uncooked materials costs are more likely to persist for the rest of 2025 and proceed to supply a tailwind to India Inc’s profitability,” mentioned Harsh Gupta Madhusudan, supervisor of Ionic Wealth’s PIPE fund.
Nonetheless, with the greenback downcycle on its approach, Madhusudan expects commodity costs to rise from 2026 onwards. “Whereas the uncooked materials tailwinds may not final past 2025, India Inc’s web revenue margin is but to peak out as their operational and monetary leverages haven’t been totally realised.”
Which means Indian business continues to be underutilising its capability attributable to tepid demand and has no incentive to borrow both, though its debt ranges are traditionally low. Whereas Nifty 500 universe’s company profit-to-GDP ratio reached a 17-year excessive of 4.7% in FY25, in response to Motilal Oswal Monetary Companies, consultants consider that this has additional room to develop as soon as demand picks up meaningfully.
The market expects mid-cap corporations to outperform their large- and small-cap friends in Q1, in step with FY25 development. Nonetheless, Centrum Broking’s Jain mentioned the “earnings lull for personal banks, IT and auto corporations ought to backside out by Q2. Therefore, the big cap Nifty 50 index ought to profit quickly as effectively.”
Analysts additionally count on the cement sector to outperform others in Q1 and the broader market to consolidate on the present ranges, going by earnings introduced thus far.
“Present valuations are more likely to maintain for now,” mentioned Ionic Wealth’s Madhusudhan. “However a US-India commerce deal, if it occurs, and a probable rate of interest minimize in August (by the Reserve Financial institution of India) will certainly enhance sentiment.”