Q3FY26 earnings preview: These six factors likely to influence earnings for this quarter; check details

The Q3FY26 earnings season is about to start with major companies like TCS, HCL Tech announcing their earnings later next week. The Q3 earnings will also be in focus as it is the first earnings season after the GST overhaul. Investors and market participants will watch the earnings keenly to assess the exact impact of GST cuts and tax cuts on the corporate earnings. Including these, here other key factors that could influence the Q3FY26 earnings

Robust GDP growth

India continues to remain the top performing economy in the world as its economy grew by 7.8% and 8.2% in Q1 & Q2 of FY26. Further, the latest estimates by Reserve Bank of India suggest India’s economy to grow by 7.4% and 6.5% in Q3 and Q4 of FY26. According to latest IMF data, India surpassed Japan as the 4th largest economy in the world at $4.16 trillion. A strong and consistent GDP growth is expected to reflect in corporate earnings as they are positively correlated with 0.6% coefficient, meaning they trail in the same direction at similar pace. In high growth phases of FY20 to FY25, corporate earnings grew 3x faster than the GDP.

Benign inflation

Among other major factors, lower inflation levels have helped the aggregate demand to remain stable throughout the quarter. Stable monsoon kept the food inflation in check, aiding for lower CPI inflation numbers. Additionally, Crude oil prices too remained lower and less volatile adding strong operational efficiency for major industrial and economic sectors. The October CPI came in the lowest at 0.25% owing to sharp correction food prices and revised prices due to GST cuts. The December CPI inflation is projected to with slight uptick from lower levels at 1.6% vs 0.71% in November. Broadly, lower inflation aided strong demand scenario across the rural and urban areas.

RBI rate cuts

Owing to lower inflation numbers and to support economic growth, RBI too accelerated the growth engine by reducing interest rates by 125 bps in total in 2025. The effect of which could be visible in Q3 earnings as lower interest rates fuelled economic expansion, with higher credit growth and reduced the pressure on the pocket of consumers. Further, lower interest also boosted consumer confidence aiding overall better demand.Additionally, RBI also cut the cash reserve ratio by 100 basis points to further inject liquidity in the system. Ample liquidity and lower interest rates are expected to aid better margins for financial institutions in this quarter.

GST rejig

The GST rationalisation is expected to be the major contributing factor to the earnings growth this quarter. As majority of the product categories now fall under lower GST rate categories, the demand effect of it is expected to be visible in earnings from this quarter. Automobiles to consumer durable all the consumer discretionary sectors witnessed major cuts in the indirect taxation in the quarter. Crisil Intelligence report highlights, 6-7% rise in revenue for the FY26 due to GST rationalisation.

Apart from above positive factors, some negative factors are also expected to influence the earnings

Weakening of Rupee

Though rupee depreciation has a larger positive impact on NIFTY50’s earnings as IT and Pharmaceutical earnings are largely positively effected due to depreciation. The other key sectors which are highly import dependant remain vulnerable to adverse currency fluctuation. Oil marketing companies, consumer electronic companies are expected face the brunt on operational margins owing to the the currency depreciation. Additionally, the debt servicing becomes costlier with consistent currency depreciation for companies with high external commercial borrowing component.

Tariffs

India continues to remain one of the highly tariffed country by the United States of America. Further the continues threat of more tariffs on the import of Russian oil have kept the investor confidence low on Indian markets. As far as tariff impact is concerned, sectors like textiles, food, fisheries, gems & jewelleries, apparel and footwear and certain automobile parts are expected to see medium to high impact on earnings owing to tariffs. Some industries have passed on the tariff impact to the end users, while others are yet to absorb the impact.

In summary, the positive factors could definitely outpace the negative factors for the Q3 earnings season. However, investor sentiment will continue to remain influenced around tariffs, currency fluctuation and upcoming Union budget announcements.