Nifty 50 profits fall for first time in over three years despite stronger revenues

Companies in India’s benchmark NIFTY 50 have reported their first year-on-year decline in quarterly profits in more than three years, even as revenues returned to double-digit growth.

Industry data for the December quarter show that aggregate net profit for 37 Nifty 50 constituents fell 8.1 per cent compared with a year earlier, marking the first contraction since the September 2022 quarter.

Excluding banks, financial services and oil and gas companies, combined revenues rose 10 per cent — the first time since March 2023 that top-line growth has entered double digits. Operating profit increased 7.5 per cent year on year, improving from 6.1 per cent in the September quarter and 5 per cent in the same period last year.

Analysts attributed the decline in bottom-line performance largely to the one-off accounting impact of India’s new labour codes, which came into effect in November. The reforms mandate that basic pay must account for at least 50 per cent of total cost-to-company, leading to higher gratuity and related provisions.

According to estimates, the changes reduced overall profit after tax by around 5 per cent, with the technology sector particularly affected.

Leading IT firms including Tata Consultancy Services, Infosys and HCL Technologies together recorded more than Rs 4,373 crore in one-off charges linked to implementation of the new rules, contributing to double-digit profit moderation in the quarter.

On a sequential basis, revenue growth accelerated in the third quarter of FY26, rising from 16 per cent to 20 per cent, aided in part by the impact of a goods and services tax reduction.

In the banking sector, earnings were weighed down by adjustments related to priority sector lending and agricultural portfolios following intervention by the Reserve Bank of India. However, analysts suggested these pressures were likely to prove temporary.

While the revenue momentum signals improving demand conditions, the one-time labour-related charges have masked underlying profit growth for many of India’s largest listed companies.

With IANS inputs