As we stand at the threshold of a new year, the earnings narrative across corporate India is beginning to shift. According to the latest report by the brokerage house Motilal Oswal, the long phase of earnings downgrades is losing momentum, and in select pockets, upgrades are finally being seen. The brokerage noted in its report this as the “first instance of an upgrade since the end of the Q1FY25 earnings season”, a small but meaningful change as markets look ahead to 2026.
Against this shifting backdrop, the brokerage house has identified a focused set of midcap and small cap stocks for 2026. Let’s take a look at the stocks and segments the brokerage believes are worth tracking into 2026 –
Motilal Oswal’s top midcap and small-cap ideas to track
In its report, the brokerage firm has highlighted a set of midcap and small cap stocks that it believes are worth watching into 2026.Motilal Oswal’s preferred midcap picks include
- Swiggy
- Dixon Technologies
- Suzlon Energy
- Jindal Stainless
- Coforge
- Kaynes Technology
- Radico Khaitan
- V-Mart Retail
- VIP Industries
Earnings upgrade likely from Q3FY26: Motilal Oswal
The core takeaway from the Motilal Oswal report is that earnings pressure is reducing. For the three months ending the second quarter of Financial Year 2026, the brokerage noted that the “aggregate Financial Year 2026 Profit After Tax (PAT) estimate was raised by 2%”.
This compares with cuts seen in earlier quarters, including “-6% / -3% / -4% / -2%” across previous earnings seasons. Mid-sized companies showed the strongest improvement, while small-cap companies continued to face pressure, with downgrades of “5.5%”.
Motilal Oswal on why some sectors are improving faster than others
Larger sectors have done relatively better, led by Oil and Gas, Telecommunications, Public Sector Banks, Insurance and Non-Banking Financial Companies that do not lend. On the other hand, Utilities, Automobiles and Healthcare dragged overall numbers.
Among smaller sectors, Chemicals, Media, Staffing and Cement saw sharper downgrades. The brokerage pointed out that “the sectoral breadth of earnings revision has been more favourable within larger sectors”, while small-cap segments remain more volatile.
Motilal Oswal’s key expectation for FY26, FY27
Looking ahead, the brokerage house expects FY26 and FY27 earnings growth of “12% / 15% year-on-year” for the Nifty and “15% / 16% year-on-year” for its broader universe.
The report added that concerns around weak GDP hurting profits appear “overblown”, especially as corporate profits form a modest share of India’s overall economy.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.
