Indian Inc delivered a better-than-expected performance during the December-ended quarter, with the aggregate profit of Nifty 50 companies growing 7%. However, this marked the seventh successive quarter of single-digit PAT growth, the longest such stretch since the pandemic (June 2020), according to a report by domestic brokerage firm Motilal Oswal.
Companies such as State Bank of India, Tata Steel, HDFC Bank, TCS, and Bharti Airtel contributed 78% of the incremental YoY accretion in earnings. Meanwhile, five others, including Tata Motors PV, Cipla, ICICI Bank, and InterGlobe Aviation, dragged overall Nifty earnings lower.
Among the Nifty 50 companies, 10 reported lower-than-expected profits, 14 posted earnings beats, and 26 delivered in-line results, according to the brokerage’s analysis.
Large-caps, small-caps deliver in line; mid-caps underperform
Large-caps under the brokerage’s coverage recorded 16% YoY earnings growth, largely mirroring the broader universe. Notably, 18 out of 21 covered sectors reported positive PAT growth, reflecting broad-based strength.
Within sectors, oil & gas, metals, PSU banks, NBFC–lending, and technology were the key performance drivers, contributing 87% of the incremental YoY accretion in earnings. In contrast, automobiles weighed adversely on earnings.
Mid-caps showed relative weakness, delivering earnings growth of 15% YoY. Motilal Oswal highlighted that private banks, metals, logistics, and insurance were among the mid-cap segments that dragged overall performance.
Conversely, sectors that clocked impressive earnings growth included healthcare, lending and non-lending NBFCs, automobiles, oil & gas, and utilities.
Meanwhile, small-cap companies under the brokerage’s coverage delivered in-line performance, with earnings rising 29% YoY (against its estimate of 34%). Within the small-cap universe, 62% of companies either exceeded or met its estimates.
Valuations near LPA; broader markets still stretched
Amid the earnings recovery, the brokerage believes Indian equities appear poised for better performance in CY26, especially after sharp underperformance versus MSCI EM in CY25.
However, it underscored a key overhang in the form of ongoing disruptions in the IT services sector and their potential spillover impact on other sectors, which remains a key near-term monitorable.
It expects 12% earnings growth for the Nifty over FY25–27E. Valuations at 20.4x 12-month forward earnings remain marginally below the long-period average (LPA) of 20.9x, while valuations for broader markets remain stretched.
The brokerage maintains an Overweight (OW) stance on automobiles, PSU banks, diversified financials, technology, consumer discretionary, and capital goods + EMS as its key preferred themes. It remains neutral on telecom, cement, and healthcare, while maintaining an underweight (UW) stance on PSEs.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
