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‘Q1 earnings, perceived as the ‘Crossover quarter’, marked a transition from the subdued low-single-digit earnings growth of FY25 to sustainable double-digit growth,’ says MOFSL.
MOFSL expects Nifty-50 EPS growth to recover to nearly 9% in FY26 (from just 1% in FY25), aided by supportive macro conditions.
Corporate India entered FY26 on a stronger footing, according to a report by Motilal Oswal Financial Services (MOFSL), which called the June 2025 quarter (Q1FY26) the “Crossover Quarter”. According to the brokerage, earnings transitioned from the muted single-digit growth of FY25 to a more sustainable double-digit trajectory, driven by better sectoral breadth and resilience in financials, energy, and telecom.
“Corporate earnings for 1QFY26, perceived as the ‘Crossover quarter’, marked a transition from the subdued low-single-digit earnings growth of FY25 to a sustainable double-digit growth trajectory. A key highlight of the quarter was better sectoral breadth of earnings growth. Of the 25 sectors under our coverage, 16 delivered double-digit growth, eight reported single-digit growth, and only one sector experienced a decline in PAT,” Motilal Oswal said in the report titled ‘India Strategy’.
Broad-Based Earnings Growth
Out of 25 sectors under MOFSL’s coverage, 16 reported double-digit profit growth, eight recorded single-digit gains, and only one posted a decline. Aggregate earnings of the companies tracked by Motilal Oswal rose 11% YoY, ahead of estimates. Excluding financials, profits rose 13% YoY, while excluding global commodities (metals and oil & gas), growth stood at 9% YoY.
Oil & Gas (+27% YoY), telecom (loss-to-profit), NBFCs (+14%), PSU banks (+7%), technology (+7%), cement (+51%), and healthcare (+11%) contributed nearly 77% of incremental profit accretion. Automobiles (-3%) weighed on performance.
Nifty-50 Stretches Single-Digit Streak
Nifty-50 earnings rose 8% YoY in Q1, the fifth straight quarter of single-digit profit growth since the pandemic. Reliance Industries, Bharti Airtel, SBI, HDFC Bank, and ICICI Bank alone accounted for 77% of incremental earnings, while Coal India, Tata Motors, ONGC, HUL, Nestle, and others dragged overall growth, according to the brokerage.
Market-Cap Segment Trends
“large-caps (87 companies) posted an earnings growth of 10% YoY – similar to the overall universe. Mid-caps (92 companies) have extended their streak of the past two quarters and yet again delivered a strong earnings growth of 24% YoY (vs. our est. of 20%),” Motilal Oswal stated.
Large-caps: Earnings grew 10% YoY, in line with estimates.
Mid-caps: Continued to outperform, rising 24% YoY versus expectations of 20%, with 17 of 22 sectors delivering double-digit profit growth.
Small-caps: Lagged significantly, with earnings falling 11% YoY against expectations of flat growth. Nearly half of the small-cap coverage universe missed estimates.
Earnings Outlook
For FY26, MOFSL projects its coverage universe to clock 12% profit growth, led by financials (+8%), metals (+19%), and oil & gas (+9%). Mid-caps are expected to deliver 21% growth, compared with 10% for large-caps and 34% for small-caps.
However, the brokerage noted that earnings downgrades continued to outpace upgrades, with the Nifty FY26 EPS estimate cut by 1.2% to Rs 1,108, primarily due to weaker forecasts for ONGC, Reliance Industries, Axis Bank, Power Grid, and HDFC Bank.
Sectoral Highlights
Banks: In-line results but with margin pressure, especially at private lenders.
Autos: Mixed quarter; OEMs posted modest growth, while ancillaries outperformed.
Consumer: Demand recovery intact, revenue up 8.3% YoY.
Oil & Gas: Profits surged but missed estimates due to OMC underperformance.
Technology: Weak revenue momentum amid macro headwinds.
Metals: Robust operating performance lifted profits 59% YoY.
MOFSL expects Nifty-50 EPS growth to recover to nearly 9% in FY26 (from just 1% in FY25), aided by supportive macro conditions. While market volatility may persist due to global tariff concerns, the brokerage believes India remains well-placed for modest gains, with mid-caps offering relatively better earnings visibility.
The report maintained an overweight stance on BFSI, consumer discretionary, industrials, healthcare, and telecom, while staying underweight on oil & gas, cement, real estate, and metals.
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h…Read More
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h… Read More
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