Indian Earnings Season: GST Cuts Fuel Consumption Hopes Amid Mixed Results

India's September quarter earnings season shows mixed trends: subdued mass consumption but growth in discretionary segments, modest IT demand, and moderate bank loan growth. Analysts forecast around 10% Nifty 50 earnings growth for FY26 and 17% for FY27.

A key driver for consumption is the anticipated GST rate cut, expected to boost sectors like auto (Maruti Suzuki, Shriram Finance) and consumer goods. Pidilite Industries also looks set for strong growth, aided by monsoons and GST benefits. The government's fiscal health hinges on this consumption rebound, especially after H1 tax revenue grew only 2.8%.

Favourable monsoons are strengthening rural demand, benefiting companies such as Godrej Consumer and Crompton. The travel sector, highlighted by Indian Hotels, anticipates a robust second half.

Signs of a turning credit cycle are visible, with infrastructure lending at a one-year high and State Bank of India projecting strong corporate credit growth. Power Grid Corporation shows easing execution and good earnings visibility.

External demand, through exports and international expansion, is another positive. IndiGo sees upside from global reach, and BEL is pursuing defence export opportunities. MTAR Technologies has raised its revenue guidance.

Notably, India's gold loan market has seen significant expansion. Bharti Airtel maintains strong performance.

Critically, Indian equity valuations are undergoing a recalibration, with the pandemic-era premium over emerging markets narrowing. This presents potential entry points but necessitates selective investment, as some quality stocks like Pidilite and Tata Consumer trade at high multiples, while others like IndiGo appear to offer value.

Impact This news has a significant impact on the Indian stock market by providing insights into corporate performance, policy effectiveness, and macroeconomic trends. It guides investor sentiment and stock selection, influencing investment decisions across various sectors. Rating: 9/10.

Definitions GST: Goods and Services Tax. A unified indirect tax system in India on the supply of goods and services. MSME: Micro, Small and Medium Enterprises. A classification of business sizes in India. FY26 / FY27: Fiscal Year 2026 / Fiscal Year 2027. Refers to the Indian financial year, typically April 1 to March 31. Nifty 50: An index representing the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange (NSE). ROE: Return on Equity. A measure of a company's profitability relative to its shareholder equity. P/E: Price-to-Earnings ratio. A valuation metric comparing a company's stock price to its earnings per share. EV/EBITDAR: Enterprise Value to Earnings Before Interest, Taxes, Depreciation, Amortisation, and Rent. A valuation metric often used for companies with significant rental expenses. EV/Sales: Enterprise Value to Sales. A valuation metric comparing a company's enterprise value to its revenue. Fiscal roadmap: The government's plan for its finances, including expected revenue, spending, and deficit targets. Liquidity: The ease with which an asset can be converted into cash without affecting its market price. Also refers to the availability of credit. Capex: Capital Expenditure. Money spent by a company to acquire, maintain, or improve its physical assets. Sum-of-the-parts valuation: Valuing a company by valuing each of its business segments or assets separately and adding them up. Free cash flows: The cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Regulatory concerns: Issues related to rules and laws governing a particular industry or company. Consensus estimates: The average forecast of financial performance made by financial analysts. Discretionary segments: Consumer spending on non-essential goods and services. Mass consumption items: Essential goods bought by the general public. Credit cycle: The expansion and contraction of credit availability and cost in an economy. Infrastructure lending: Loans provided for projects like roads, bridges, and power plants. Asset capitalisation: Recording an asset on a company's balance sheet and depreciating its cost over its useful life. Project pipeline: A list of future projects a company plans to undertake. Capex roadmap: A long-term plan detailing future capital expenditure projects. Pandemic-era valuation premium: Higher stock market valuations in India compared to other emerging markets during the COVID-19 pandemic. Emerging market peers: Countries with developing economies. IPO: Initial Public Offering. The first time a private company offers shares of stock to the public.