Broader consumption may take another quarter to recover; Q2FY26 earnings of companies likely mixed: Report

Broader consumption demand in India may take one more quarter to recover fully, even as some sequential improvement is expected in high-frequency economic indicators, according to a report by Axis Securities.

The report suggested that companies may continue to undergo inventory adjustments before consumption patterns normalize.

It stated, “the broader consumption demand could still take one more quarter to get back on track and to undergo a complete inventory adjustment.”The Q2FY26 earnings season is expected to show a mixed trend, broadly in line with previous quarters that witnessed relatively soft performance.

Several factors have shaped this outlook, including mixed trends in US policies, depreciation of the Indian currency, a slower uptick in exports, the announcement and implementation of GST 2.0, a normal and well-distributed monsoon, and healthy reservoir levels across the country.

The report highlighted that while certain sectors are likely to see growth, others may continue to face pressure.Telecom, industrials, materials, utilities, and consumer discretionary are expected to show improvement, whereas Banks, Staples, and certain segments of the pharma sector are projected to remain under strain.The report also mentioned that on the financial front, Nifty is forecasted to deliver Revenue, EBITDA, and PAT growth of 9 per cent, 4.8 per cent, and 8 per cent year-on-year (YoY), respectively, for Q2FY26. Excluding Interglobe Aviation, Nifty’s PAT growth is expected at 6.5 per cent YoY.

Despite external risks, the report stated that India’s domestic economy is well-positioned, supported by strong macroeconomic fundamentals. The report noted that the growth trajectory for FY26 is likely to be stronger than that of FY25.

However, on a year-to-date (YTD) basis, the Indian market has underperformed the US and other emerging markets by a significant margin.

Overall, while some pockets of the economy are showing signs of recovery, broader consumption demand and full inventory adjustments are expected to take another quarter, making the Q2 FY26 earnings season a mixed bag.