Domestic brokerage firm Motilal Oswal, in its latest note, said that the past trend of easing earnings cut intensity has gradually given way to earnings upgrades, driven by a series of stimulative fiscal and monetary measures. The brokerage has raised the aggregate FY26 PAT estimate for its coverage universe by 2% after the September-quarter earnings, the first upgrade since the end of the Q1FY25 earnings season.
Among segments, mid-caps saw the highest earnings upgrades at 3.1%, while large caps also posted a solid upgrade of 2%. Small caps, however, remained laggards, with continued downgrades of 5.5%.
It currently forecasts FY26 and FY27 earnings growth of 12% and 15% year-on-year for the Nifty 50 and 15% and 16% year-on-year for its MOFSL universe. It added that earnings revisions in either direction are unlikely to be sharp from here, barring a possible exception for Nifty 50 FY26 PAT.
Earnings upgrades were driven by Oil & Gas, Telecom, PSU Banks, Insurance, and NBFCs, while Utilities remained the biggest drag, followed by Autos and Healthcare. Smaller sectors saw more downgrades than upgrades, led by Chemicals, Media, Staffing, and Cement.
Large-cap sectoral revisions were evenly balanced, with PSU Banks, Insurance, Oil & Gas, Telecom, and Autos (ex-TAMO) seeing upgrades, while Utilities, Real Estate, and Consumer Durables faced cuts. Mid-cap trends were also balanced, but small-cap sectors lagged, led by sharp downgrades in private banks, insurance, retail, and EMS.
Mid-teens earnings growth possible despite sub-10% GDP expansion
The brokerage also addressed a key investor question on whether corporate earnings can grow at mid-teens despite sub-10% nominal GDP growth. Its analysis of the past two decades shows that while nominal GDP growth matters, it explains only a limited portion of corporate profit growth.
Even for the Nifty 50, nominal GDP growth accounts for about 20% of profit growth, with other factors such as leverage, pricing power, cost pressures, and competition playing a larger role. As a result, the brokerage said corporate earnings growth should be assessed beyond just the GDP growth trajectory.
Indian stock market positioned well for strong rally in 2026
The brokerage remains positive on the Indian stock market and believes equities are well poised to recover from the underperformance seen in CY2025, supported by improved earnings prospects, supportive domestic macroeconomic conditions, and an easing geopolitical environment.
India could also benefit from the cooling of overexuberance in global AI stocks, which may prompt country rotation toward India within foreign institutional investor (FII) portfolios. A lower USD/INR level could further provide an attractive entry point.
It is overweight on sectors such as diversified financials, automobiles, capital goods, IT services, and telecom, while it remains underweight on energy, metals, utilities, and consumer staples.
Its top large-cap picks include Bharti Airtel, ICICI Bank, SBI, Infosys, L&T, M&M, Titan, Eternal, BEL, IndiGo, TVS Motor, Tech Mahindra, and Indian Hotels. Top mid-cap picks include Swiggy, Dixon Technologies, Suzlon Energy, Jindal Stainless, Coforge, Kaynes Technology, Radico Khaitan, V-Mart Retail, and VIP Industries.
Disclaimer: This story is for educational purposes only. 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.
