'Q1 shows resilience, but downside risks still loom'

Nifty24, 160.80-58.25. Motilal Oswal Midcap Fund Direct-Growth.

Key points

• Top Trending Stocks: SBI Share Cost, Axis Bank Share Rate, HDFC Bank Share Cost, Infosys Share Rate, Wipro Share Cost, NTPC Share Rate.
• IcraQ1FY27 earningsIndia earnings outlookHSBC India strategyearnings downgrade riskIndian stocksFY27 earnings estimatesNifty earningscorporate earningsmotilal oswal financial services.
• Indian firms delivered better-than-expected Q1FY27 earnings, with around 70% of firms gathering or beating HSBC's estimates.
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Nifty24, 160.80-58.25. Motilal Oswal Midcap Fund Direct-Growth. The Economic Times daily newspaper is available online now.

Q1 earnings show resilience, but downside risks still loom. HSBC explains why.

Q1 earnings show resilience, but downside risks still loom. HSBC explains why. ETMarkets.comLast Updated: Aug 25, 2026, 12: 43: 00 PM IST.

Indian firms delivered better-than-expected Q1FY27 earnings, with around 70% of firms gathering or beating HSBC's estimates. While financials drove earnings upgrades, mid- and small-cap firms led expansion. Nevertheless, HSBC flagged risks of downgrades in coming quarters as elevated commodity costs persist and the benefits of GST cuts and inventory gains fade.

Indian firms overall posted better-than-expected earnings for the first quarter of FY27. It led to analysts upgrading their forecasts, but there is a risk of downgrades in the coming quarters, HSBC stated in its latest India equity strategy report. Approximately 70% of Indian firms' Q1 results beat or were in line with HSBC's expectations, with mid caps and small caps leading the way by posting up to 35% YoY expansion. Consumption stayed resilient after the GST cuts and RBI easing last year, HSBC further remarked, adding that firms additionally rolled out calibrated cost increases and, along with inventory gains, these partially offset higher raw material costs.

"Overall, the results were better than projected, with the expansion recovery holding up well. FY27 estimates have been upgraded for almost half of businesses in FTSE India since June-end, " the brokerage observed. It highlighted that the solid results pushed FY27 earnings upgrades up by 50 bps to 14.3%, led by financials (PSUs and NBFCs). Why earnings downgrade risks loom.

After lower margins in new units, that remarked, HSBC observed that there were consensus downgrades in autos, due to higher commodity rates, and hospitals. While the lift from GST cuts and inventory gains fade, "Looking ahead, there's a risk of downgrades in coming quarters as commodity rates stay elevated. The impact of further cost hikes on demand is another risk, " HSBC stated. Live Events. Which sectors performed the best and worst?

While energy and tech were the key laggards, HSBC stated, materials, industrials and financials drove overall expansion. While jewellery, paints, ferrous metals and cables and wires held up better, it continued that margin compression was observed in industrials, autos, durables and hospitals. "FY27 earnings estimates stand at 14.3%, led by financials (PSUs and NBFCs). We remain neutral on India from a regional perspective, " it concluded. Notably, a number of analysts have highlighted resilient Q1 earnings. Ratings agency ICRA remarked India's corporate earnings cycle kicked off FY27 on a stronger-than-expected note, with aggregate revenues of 838 listed businesses in its sample growing 22% year-on-year in Q1. This is sharply higher than the 13% YoY expansion noted in Q4 of FY26. ICRA remarked this was driven by commodity and bullion price-led value inflation, demand lift from the GST rate cuts last year that continued to spur the automobile sector, and resilient overall consumption volumes, despite the West Asia flare-up and El Niño worries. Q1 earnings show resilience as demand, cost headwinds prove less severe than projected: ICRA Motilal Oswal Financial Services additionally noted that Nifty businesses have delivered a stronger-than-expected start to the first-quarter earnings season. According to The brokerage, the expansion has outpaced its expectation of 7% and reiterated its top Nifty picks, including Bharti Airtel, SBI, ICICI Bank, M&M, Titan, Eternal, Shriram Finance, Bajaj Finance and InterGlobe Aviation, its noted in its August strategy note. Nifty Q1 earnings grow 11% to beat estimate, notes Motilal Oswal; picks Bharti Airtel, SBI, ICICI Bank among top bets (With inputs from agencies) (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times).

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Taken together, the developments around ' Q1 shows resilience, but downside risks still loom&#x27 point to a situation that is still moving, and the coming days should bring more clarity.