Q1FY26 earnings preview: As the June quarter earnings season begins tomorrow, with IT majors leading the announcements, expectations from India Inc. remain measured. While key domestic indicators—such as easing inflation, improving liquidity, and an above-normal monsoon—are encouraging, their positive impact is yet to be meaningfully reflected in corporate earnings.
Analysts expect these tailwinds to start yielding significant results from the second half of FY26. After four consecutive quarters of low single-digit growth, the aggregate profit after tax (PAT) for Nifty 50 companies is expected to show another modest rise of 5% year-on-year in Q1FY26, largely driven by a strong rebound in the profitability of oil marketing companies, as per the projections made by the domestic brokerage firm Motilal Oswal in its latest report.
Excluding metals and oil & gas, it expects PAT to grow by 4% year-on-year. The brokerage views the June quarter as a “crossover quarter,” marking a transition from the subdued earnings growth seen in FY25 to a more sustainable double-digit trajectory over the next four quarters.
Motilal Oswal estimates Nifty PAT to grow by 6%, 13%, and 16% year-on-year in Q2, Q3, and Q4 of FY26, respectively. Even excluding commodities, Nifty earnings are projected to expand at a stronger pace of 5%, 11%, and 16% over the same period.
Sectoral breadth for earnings in 1QFY26 looks promising
Although the brokerage expects a modest overall corporate performance in Q1FY26, it anticipates several sectors to deliver double-digit profit-after-tax (PAT) growth. These include capital goods (+12%), cement (+35%), chemicals (+10%), EMS (+46%), logistics (+20%), healthcare (+11%), real estate (+40%), retail (+23%), staffing (+11%), telecom (from loss to profit), and utilities (+12%).
In contrast, a few sectors are expected to witness muted earnings growth or even a decline. These include Technology (+7%), Consumer (+3%), BFSI (+3%), Metals (-4%), and Automobiles (-10%). The number of sectors likely to report negative PAT growth is expected to fall to just two (Autos and Metals) in Q1FY26, compared to six sectors in FY25—indicating a broadening of growth across the market.
Interestingly, for the full year FY26, the brokerage currently does not expect any sector to post negative PAT growth, according to the brokerage.
Stage is set for a healthy economy and market performance in 2HFY26.
While the Indian equity market has risen over the past few months based on expectations of earnings recovery in FY26, it has still experienced both time and price corrections from the highs reached in September 2024.
Therefore, the brokerage remains constructive about Indian equities and views India as one of the unique markets that offers an uncommon trifecta of size, growth, and diversification. While valuations have crept above long-term averages, with the Nifty 50 currently trading at 21.7x 12-month forward—at a 5% premium to LPA—it does not consider it to be in the overheated zone.
“We see potential for further market upmove, especially in an environment of improving corporate earnings growth, low interest rates, ample liquidity, and macroeconomic recovery. Our model portfolio is tilted towards domestic names, driven by expectations of a domestic recovery. While SMIDs trade at expensive valuations, we have picked select small- and mid-cap high-conviction names in our portfolio,” the brokerage said.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
