Domestic brokerage house Motilal Oswal (MOSL) described corporate earnings for Q1FY26 as the “Crossover quarter,” reflected a shift from the low single-digit earnings growth of FY25 to a more sustainable double-digit trajectory. The Nifty reported an 8% YoY PAT growth, exceeding their estimate of 5%, marking the fifth consecutive quarter of single-digit earnings growth since the pandemic (June 2020).
Nifty Earnings Drivers and Laggers
As per the brokerage, five Nifty companies—Bharti Airtel, Reliance Industries, SBI, HDFC Bank, and ICICI Bank—accounted for 77% of the incremental YoY accretion in earnings. On the other hand, Coal India, Tata Motors, IndusInd Bank, ONGC, HCL Technologies, Kotak Mahindra Bank, Axis Bank, Eternal, HUL, and Nestle contributed negatively to earnings growth.
Top Upgrades and Downgrades
MOSL highlighted that the leading earnings upgrades for FY26E included Tata Consumer (+9.7%), Apollo Hospitals (+6.5%), Eicher Motors (+3.8%), Hero MotoCorp (+3.5%), and IndusInd Bank (+2.6%). Conversely, the major downgrades were Eternal (-35.4%), ONGC (-10.2%), Axis Bank (-8.7%), Power Grid Corp. (-5.3%), and Sun Pharma (-5.1%).
Overall Earnings Outlook
According to MOSL, 1QFY26 earnings were broadly in line with expectations, with the severity of cuts moderating compared to previous quarters. EPS growth for the Nifty-50 is projected to rise to ~9% in FY26, compared with just 1% in FY25, supported by an improved macro environment driven by fiscal and monetary stimuli. MOSL added that, despite recent market volatility due to US tariff concerns, reasonable valuations and stronger earnings prospects should enable modest market gains.
“While the Indian equity market has been volatile over the past two months owing to tariff jitters, we believe that improved earnings prospects and reasonable valuations (barring small-caps) should enable the market to achieve modest gains. We believe that the influence of the US tariff wars on Indian markets will be limited. The Nifty trades at 22.2x FY26E earnings, near its LPA of 20.7x. While our model portfolio bias remains towards large-caps (~70% weight), we have turned more constructive towards mid-caps (with 22% weight vs. 16% earlier) owing to better earnings delivery and improving prospects. We are OW on BFSI, Consumer Discretionary, Industrials, Healthcare & Telecom, while we are UW on Oil & Gas, Cement, Real Estate, and Metals,” it said.
Top largecap and midcap stock picks post Q1
Bharti Airtel, ICICI Bank, L&T, M&M, Sun Pharma, and Titan are among MOSL’s top largecap stock picks post Q1 results. Meanwhile, the broekrage’s preferred midcap picks include SRF, Dixon, Suzlon Energy, Coforge, and Page Industries, among others.
Large-cap, Mid-cap, and Small-cap Performance
MOSL noted that within their coverage universe, large-caps (87 companies) posted 10% YoY earnings growth, in line with overall trends, while mid-caps (92 companies) delivered a strong 24% YoY growth, outperforming estimates of 20%. Mid-cap sectors such as Oil & Gas, PSU Banks, NBFCs, Metals, and Technology contributed 89% of incremental YoY earnings. Small-caps (132 companies), however, recorded a broad-based miss, with earnings declining 11% YoY and 46% of companies missing MOSL’s estimates.
Beat-Miss Dynamics
MOSL reported a balanced beat-miss ratio for their universe, with 37% of companies exceeding estimates and 36% reporting a miss at the PAT level. The earnings upgrade-to-downgrade ratio was 0.6x for 1QFY26 (FY26E), with 61 companies upgraded by more than 3% while 108 companies were downgraded by over 3%.
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.
