Mumbai’s benchmark Nifty 50 index faced an unexpected setback in the October-December quarter, with net profit declining for the first time in 13 quarters even as revenues climbed 10% year-on-year. This marks a sharp departure from the steady growth trajectory investors have grown accustomed to.
Excluding banks, financial services, and oil & gas firms, the core revenue growth hit double digits for the first time since March 2023. However, a one-off accounting hit from India’s new labor laws dragged down overall profitability. Operational profits rose a solid 7.5% annually, outpacing the 6.1% from the prior quarter and 5% a year earlier.
Industry data reveals that 37 Nifty 50 companies saw their combined net profit slump 8.1% compared to last year—the first negative growth since September 2022. Analysts point squarely to the labor code overhaul, which mandates raising basic pay to 50% of cost-to-company and beefing up gratuity provisions.
The changes, implemented in November, introduced sweeping reforms in wages, workplace safety, and social security. Tech giants like TCS, Infosys, and HCL absorbed over ₹4,373 crore in one-time charges, leading to double-digit profit drops in the sector—estimated at 13%.
On a brighter note, sequential revenue growth accelerated to 20% from 16% in the prior quarter, fueled by GST cuts boosting consumption. Post-tax profits took a 5% hit overall due to these reforms. As companies adjust, the market watches closely for signs of recovery in the coming quarters.
This quarter’s results underscore the tension between structural reforms and short-term earnings pressures, a dynamic that could reshape investor sentiment in India’s equity markets moving forward.