As the first quarter earning season for Financial year 2025-26 came to an end, Motilal Oswal highlighted that the June quarter marked a transition to a sustainable double-digit earnings growth trajectory. According to the report, midcap companies have extended their winning streak, with earnings growing 24 per cent year-on-year. Small caps however, have seen growth faltering.
Midcap companies extend profit growth streak for third quarter
Multiple mid-cap sectors reported double-digit profit growth, making them the strongest performers for the third consecutive quarter.
Oil & Gas, PSU banks, NBFCs, metals and technology were the main drivers, contributing nearly 89 per cent of incremental earnings growth.
Small-caps under pressure
In contrast, small-cap companies continued to struggle. Earnings in this segment fell 11 per cent year-on-year against MOFSL’s expectations of flat growth. Nearly half of the small-cap universe missed estimates, with weakness seen in private banks, NBFCs, insurance, oil & gas and automobiles.
Large-caps posted a steady 10 per cent growth, broadly in line with the overall universe. With this, large-caps extended their streak to 20 straight quarters of profit growth.
Nifty remains in single-digit zone
The Nifty 50 posted an 8 per cent year-on-year growth in profit after tax, marking the fifth consecutive quarter of single-digit earnings expansion. Five companies—Reliance Industries, Bharti Airtel, SBI, HDFC Bank and ICICI Bank—contributed 77 per cent of the incremental growth.
On the other hand, Coal India, Tata Motors, IndusInd Bank, ONGC, HCLTech, Kotak Mahindra Bank, Axis Bank, HUL and Nestle dragged the index’s performance.
Corporate earnings stay resilient in Q1FY26
Overall, corporate earnings showed resilience in Q1FY26. Sixteen out of 25 sectors under MOFSL coverage reported double-digit growth, eight sectors grew at single digits, and only one sector reported a decline in profit after tax.
Oil & Gas (up 27 per cent), cement (up 51 per cent), healthcare (up 11per cent), telecom (loss-to-profit) and technology (up 7 per cent) anchored the quarter’s performance. Automobiles, however, dragged overall growth with a 3 per cent fall in earnings.
Motilal Oswal pegs FY26 profit growth at 12 per cent
MOFSL expects its coverage universe to deliver 12 per cent profit growth in FY26, led by financials, metals and oil & gas. These three sectors are likely to contribute nearly half of incremental earnings.
However, the brokerage noted that earnings downgrades continue to outpace upgrades. “The Q1FY26 earnings have broadly been in line, with the severity of earnings cuts moderating compared to the previous quarters,” the report said.
Motilal Oswal Services has turned more constructive on mid-caps, raising their weight in its model portfolio to 22 per cent from 16 per cent earlier. The brokerage remains overweight on BFSI, consumer discretionary, industrials, healthcare and telecom, while maintaining an underweight stance on oil & gas, cement, real estate and metals.
Motilal Oswal Services has upgraded the estimates for FY26
Tata Consumer (up 9.7 per cent), Apollo Hospitals (up 6.5 per cent), Eicher Motors (up 3.8 per cent), Hero MotoCorp (up 3.5 per cent), and IndusInd Bank (up 2.6 per cent) seen the biggest earnings upgrades for FY26 by the Motilal Oswal services.
On the other hand, the steepest downgrades came for Eternal (down 35.4 per cent), ONGC (down 10.2 per cent), Axis Bank (down 8.7 per cent), Power Grid Corporation (down 5.3 per cent), and Sun Pharma (down 5.1 per cent), reflecting sectoral headwinds and company-specific challenges.