India's corporate sector is grappling with a challenging economic environment, as evidenced by a net profit growth of only 3.6% in Q2 FY25, marking the slowest growth since June 2020. Waterfield Advisors' Vipul Bhowar indicated that earnings recovery in Q3 may be limited if conditions do not improve. Jefferies India has downgraded FY25 earnings estimates for 63% of the companies it covers, the steepest downgrade since 2020. Despite these challenges, there are signs of recovery in the IT sector, particularly driven by increased spending on artificial intelligence (AI) and growth in the banking, financial services, and insurance (BFSI) sector. The IT services firms are experiencing a revival after five quarters of a hazy macro environment, with hiring surging and discretionary spending gradually returning. However, non-financial companies continue to face significant headwinds, with more than half of Nifty firms reporting lower-than-expected profits during this period.