Ceasefire holds, but the Q4 earnings season feels the tremor
When I first heard about the ceasefire in the Israel‑US‑Iran standoff, I breathed a sigh of relief. It felt like the tension that had been hovering over our news feeds finally loosened a bit. But as I opened the financial pages the next morning, the numbers were shouting a different story. The war may have paused on the ground, yet the economic aftershocks are already echoing in the March quarter results of Indian companies.
The earnings season kicked off today when Tata Consultancy Services (TCS) released its numbers after market hours. Even though TCS’s performance was decent, the chatter on the trading floor quickly turned to the larger picture – a picture where rising crude oil, tighter supply chains and higher raw‑material costs are squeezing profit margins across a slew of sectors.
In my own experience, watching the market react to geopolitical events feels a bit like watching a monsoon cloud gather. You see the darkening sky, feel the humidity rise, and you know a heavy downpour is likely – but you can’t say exactly when it will hit each corner of the country. The same is happening with the Q4 numbers: the cloud has settled, and companies are now bracing for the rain.
Crude oil spike shakes earnings estimates
The biggest surprise for me this quarter has been how sharply oil prices jumped when the conflict flared up. That spike didn’t just affect the oil majors; it rippled through every industry that relies heavily on energy. From a small transport fleet in Bangalore to a big manufacturing unit in Gujarat, the cost of diesel and petrol went up almost overnight.
Analysts have pointed out that the upward trend in earnings forecasts we enjoyed for the last two quarters has now reversed. In March, the fear of supply disruptions and the rising price of crude pushed input costs higher for many firms. For Nifty‑listed companies, the consensus now sees earnings growth of merely 4 % to 6 % year‑on‑year, a far cry from the double‑digit growth that seemed almost guaranteed a few months ago.
Motilal Oswal Financial Services highlighted that sectors such as automobiles, capital goods, logistics, technology and utilities have seen the biggest downward revisions in their FY26 earnings projections. That’s a mouthful, but the underlying message is simple: higher oil price = tighter margins = lower profit expectations.
More than 40 stocks could see profits tumble over 20 %
Now, here’s where the numbers get a bit scary. While some pockets of the market – especially NBFCs and metals – are still showing optimism, a large group of listed companies is expected to report profit declines of more than twenty percent.
From my conversations with friends in the brokerage world, the consensus is that the pain is widespread. It isn’t just a handful of laggards; it’s a cross‑section of industries that are feeling the pinch.
Oil & gas – the hardest hitters
If you ask anyone working in the energy sector, they’ll tell you that this quarter feels like climbing a steep hill with a sandbag on their back. Rising crude prices have slashed refining margins and pushed up the cost of importing LNG.
- Indraprastha Gas profit may decline 45.1 % YoY
- Petronet LNG net profit is expected to fall 23.8 % YoY
- HPCL profit may drop 31 %
Higher LNG import costs combined with volatile crude prices have really squeezed profitability. I remember a colleague in Delhi telling me that the cost of gas for his office building went up so much that the landlord started asking for higher rent – that’s how the ripple effect works.
Auto makers wrestling with rising costs
The automobile sector is another area where the impact is palpable. Raw material prices – steel, aluminium, plastics – have all edged higher. Add to that the cost of components, many of which are imported, and you have a perfect storm for margin compression.
Hyundai Motor India, for instance, is projected to see its profit plunge by 26.7 % compared to the same period last year. The drop is largely driven by higher component costs and a slowdown in consumer sentiment, especially in tier‑2 and tier‑3 cities where price sensitivity is higher.
When I visited a dealership in Pune last month, the sales executive showed me the price list and mentioned that they had to offer extra discounts to keep customers interested. That’s a clear sign that the margin pressure is not just on paper.
Defence and industrial names under strain
Even the defence sector, which usually enjoys a strong order book, is not immune. Rising input costs and execution delays are nibbling away at margins.
- Hindustan Aeronautics profit may fall 32.9 %
- KEC International – profit outlook under pressure (specific % not disclosed)
- Zen Technologies – profit outlook under pressure (specific % not disclosed)
The numbers may look stark, but the reality on the ground is that many of these companies are still delivering aircraft and weapons systems on schedule. The problem is that each rupee spent on raw material now costs more, cutting into the bottom line.
Other companies walking on a thin line
Beyond oil, autos and defence, a host of other firms across different sectors are also projected to record sharp profit declines. Here’s a quick look at some of those names:
- Biocon
- Cipla
- Dr Reddy’s Laboratories
- Zydus Lifesciences
- Hindalco Industries
- Jindal Steel
- GAIL
- Tata Power
- JSW Energy
- IDFC First Bank
Most of these firms have highlighted the rise in raw material costs as a key factor. For example, GAIL’s pipeline business is feeling the pinch of higher gas prices, while Tata Power’s renewable portfolio is still battling inflated component costs.
In conversation with a friend who works at a pharmaceutical company, he mentioned that the cost of active pharmaceutical ingredients (APIs) imported from abroad has jumped, making it harder to keep margins healthy without raising drug prices – something the regulator may not like.
Bright spots still shining in the earnings season
Even with all this gloom, the overall earnings picture isn’t all doom and gloom. Some sectors are still showing decent growth, and that gives investors a little room to breathe.
Motilal Oswal’s projections for the quarter include:
- NBFC lending sector earnings growth at 30 % YoY
- Metals sector growth at 27 % YoY
- Private banks growth at 12 % YoY
- Technology sector growth at 11 % YoY
- Consumer sector growth at 10 % YoY
Large‑cap companies are expected to see a modest PAT growth of about 7 %, while the mid‑cap and small‑cap segments could post stronger rises of roughly 25 % and 18 % respectively. That tells me that the market is still finding ways to grow, especially in areas not directly tied to crude oil.
On a personal note, I’ve been following a mid‑cap tech firm that recently announced a partnership with a European AI startup. Their revenue is climbing even though their profit margin is tighter – it’s a classic case of “grow now, optimise later”.
Analysts keep a cautious eye on the horizon
Brokerage house Nuvama Wealth Management has been warning investors to stay on their toes. They argue that while revenue growth may stabilise, the lingering uncertainty from the conflict, combined with a soft global economy and slowing private credit trends in the US, could keep pressure on corporate margins.
They’ve also highlighted a few risk factors:
- Weak global demand could hurt export‑oriented firms.
- Supply chain disruptions from the West Asia war may cause further cost spikes.
- Elevated uncertainty may delay capital spending by corporates.
In my view, the caution is justified. Even though the ceasefire has paused the active fighting, the supply chain aftershocks will take time to settle. Companies that rely on imported inputs – whether it’s a pharma firm buying APIs from China or an auto maker importing chips – will have to navigate a choppy road for a while.
What to watch as the Q4 results roll out
As each company releases its numbers, investors will be tracking a few key themes:
- How much of the profit decline is due to higher input costs versus weaker demand?
- Which firms manage to pass on cost increases to customers without losing market share?
- Are there any surprise winners – perhaps firms that have diversified supply chains or benefit from higher energy prices?
From my own watch‑list, I am keeping an eye on the NBFC space. Even though the sector is growing at 30 % YoY, the credit quality of borrowers could become a concern if global rates stay high. On the flip side, the metals sector’s 27 % growth looks promising, but I’ll be watching the cost of raw material inputs closely.
All in all, the earnings season promises to be an interesting mix of pain and potential. The ceasefire may have stopped the guns, but the financial battlefield is still active. Investors, analysts and even everyday savers like you and me will be watching closely to see which companies can weather the storm and which will be left shivering.
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