As of October 31, 151 companies within the MOFSL coverage universe and 27 Nifty companies had reported results. These represent nearly two-thirds of the Nifty’s estimated profit pool and 42% of India’s market cap. The numbers so far indicate that earnings grew 14% year-on-year, in line with expectations.
The key driver of this growth has been the Oil & Gas sector, with profits surging nearly nine times year-on-year for Oil Marketing Companies, along with healthy double-digit gains in technology, cement, capital goods, and metals. Together, these five sectors contributed almost 86% of the total earnings growth in Q2.
Commodities lead the earnings recovery
Excluding the impact of global commodities such as metals and oil, the overall earnings growth for the MOFSL universe stood at 6% YoY, slightly better than earlier estimates of 2%. When financials are excluded, the universe recorded a 25% YoY jump in profit, supported by industrials and domestic cyclicals.
For the Nifty 50, earnings of the 27 companies that have reported so far grew 5% YoY, driven mainly by HDFC Bank, Reliance Industries, TCS, JSW Steel, and Infosys. These five names alone accounted for 122% of the incremental earnings growth, offsetting weaker performances from Coal India, Axis Bank, Hindustan Unilever, and Kotak Mahindra Bank, which dragged the index lower.
Out of these 27 Nifty firms, seven companies reported results below expectations, five recorded a beat, and fifteen were broadly in line with forecasts.
Midcaps outperform, smallcaps lag
The report underlined a strong divergence between market segments. Midcap companies once again outperformed, delivering 26% YoY profit growth, compared to the 13% increase in large-caps and just 3% in smallcaps.Sectors such as cement, technology, PSU banks, real estate, and metals powered the mid-cap earnings surge, marking the fourth straight quarter of double-digit growth for this segment.
In contrast, smallcaps continued to struggle in sectors like retail, private banks, NBFCs, and media, limiting their overall profit growth. Still, 69% of small-cap companies met or exceeded earnings estimates, compared to 84% of large-caps and 77% of mid-caps.
“Mid-caps have extended their streak of outperforming large-caps for the fourth consecutive quarter, reflecting the improving breadth of India’s earnings recovery,” the report noted.
Margins expand despite cost pressures
Earnings quality has also improved. The EBITDA margin for the MOFSL universe (excluding financials) expanded by 170 basis points YoY to 16%, thanks to better pricing in oil, technology, cement, utilities, and chemicals. However, sectors such as telecom, healthcare, retail, and real estate continued to face margin compression.
While profit growth has been broad-based, analysts remain cautious about the sustainability of margins, especially as raw material costs stabilise and demand normalises after a strong festive quarter.
Modest upgrades to Nifty earnings
Motilal Oswal made slight upward revisions to its Nifty EPS estimates, raising FY26 EPS to Rs 1,101 from Rs 1,096 earlier, and FY27 EPS to Rs 1,278 from Rs 1,274. The upgrades were driven mainly by HDFC Bank, Tata Steel, Ultratech Cement, Dr Reddy’s Laboratories, and Shriram Finance.
For the broader MOFSL universe, earnings estimates were raised by 1.2% for FY26 and 0.4% for FY27, led by upgrades in oil & gas, cement, PSU banks, healthcare, and autos. Interestingly, while the largecap universe saw only a 1% upgrade, midcaps recorded a healthy 3.7% upgrade. On the other hand, smallcaps saw a downgrade of 4.3% for FY26, reflecting sector-specific pressures.
Valuations steady, outlook improving
Despite muted index-level gains over the past year, Motilal Oswal believes that the earnings cycle is now bottoming out, with growth likely to accelerate into double digits in the coming quarters.
“The Indian markets are in a healthier state compared to last year,” the report said. “With Nifty trading at 21.4 times FY26 earnings—close to its long-period average—any signs of faster earnings growth could support valuation expansion.”
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The brokerage expects domestic reforms, infrastructure spending, and a stable policy environment to drive the next leg of earnings growth, especially for domestic-focused sectors. However, it also flagged that tariff uncertainties and global demand trends remain key external risks.
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