After months of earnings downgrades and muted expectations, could India’s stock market finally be getting some good news? As per the recent report by Motilal Oswal, it suggests that the worst of the earnings cuts may be behind us, with corporate profit estimates seeing their first upgrade in over a year. As the market looks ahead to 2026, the brokerage has also identified a set of large and mid-cap stocks that could remain in focus as the next phase of the market cycle takes shape.
The brokerage noted that this is the “first instance of an upgrade since the end of Q1FY25 earnings season”, marking a clear change from the repeated earnings cuts seen over the past five quarters.
Stocks in the spotlight as estimates improve
Motilal Oswal’s preferred large-cap stocks for the coming period include Bharti Airtel, ICICI Bank, State Bank of India, Infosys, Larsen & Toubro, Mahindra & Mahindra, Titan, Eternal, Bharat Electronics, InterGlobe Aviation, TVS Motor Company, Tech Mahindra and Indian Hotels.
In the mid-cap space, names such as Swiggy, Dixon Technologies (India), Suzlon Energy, Jindal Stainless, Coforge, Kaynes Technology, Radico Khaitan, V-Mart Retail and VIP Industries stand out.
The brokerage pointed out that earnings upgrades have been more visible in bigger companies, especially within mid-cap stocks, where profit estimates rose by over 3%. Large-cap stocks also saw upgrades of around 2%, while small-cap companies continued to face pressure.
Earnings cuts ease after a long stretch
For much of the past year, earnings forecasts were steadily being revised downwards. However, Motilal Oswal pointed out that “the intensity of earnings cuts had been moderating”, and that trend has now turned into modest upgrades.
For the financial year 2026, aggregate profit-after-tax estimates were raised by 2%, a sharp contrast to earlier quarters when estimates were cut by as much as 6%.
The brokerage added that even after the second quarter earnings season of financial year 2026, upgrades have continued, though at a slower pace. It noted this phase as one where a “stable earnings floor” may be forming, which could help support equity markets.
Sector trends show a mixed picture
According to the brokerage, Oil and Gas, Telecommunications, Public Sector Banks, Insurance and Non-Banking Financial Companies (non-lending) led positive earnings revisions. Telecom stood out with a sharp improvement, while Public Sector Banks also saw steady upgrades.
On the flip side, Utilities emerged as the biggest drag, followed by Automobiles and Healthcare.
Motilal Oswal highlighted that the weakness in automobiles was largely due to one stock, Tata Motors, and excluding it, the sector actually saw upgrades. Smaller sectors such as Chemicals, Media and Cement continued to see downgrades, particularly among small-cap stocks.
Can earnings grow if GDP slows?
One concern investors continue to flag is whether corporate profits can grow at a healthy pace when India’s nominal Gross Domestic Product (GDP) growth is expected to stay below 10%.
The brokerage house in its report noted that “nominal GDP growth does not fully explain annual corporate profit growth.”
The brokerage highlighted that over the past two decades, GDP growth explained only a small part of profit growth, even for large companies like those in the Nifty 50 index. Factors such as pricing power, cost control, competition and balance sheet strength play a much larger role.
It also noted that corporate profits form a relatively small share of India’s overall economy, making earnings more cyclical than GDP growth. With a low base in the previous year, the brokerage believes mid-teens earnings growth remains possible.
Outlook remains steady, not stretched
Motilal Oswal also added that Indian equities are positioned to recover from recent underperformance, supported by better earnings visibility and supportive domestic conditions. It added that “valuations, particularly for large-caps, are not demanding”, with price-to-earnings ratios close to long-term averages.
The brokerage also pointed out that concerns around slowing economic growth hurting profits appear “overblown”, given the limited historical link between the two. Global factors, including changes in foreign investor allocation and currency movements, could also influence flows into Indian markets in the coming quarters.