Chasing Earnings Growth: Will Mid Caps Come To The Rescue? | Open Interest

The Indian equities market has been chasing earnings growth, but it appears that growth may be sluggish this year, especially when it comes to frontline stocks. This is reflected in the underperformance of the Nifty 50 Index compared to the Nifty Midcap 150 Index.

Since the beginning of the current financial year (FY26), the Nifty Midcap 150 Index has risen by 11.59%, while the Nifty 50 has gained just 6.84% during the same period. In the last financial year (FY25), the Nifty Midcap 150 delivered a return of 16.81% compared to 10.2% for the Nifty 50.

The market is aware of this trend and has taken note of midcap companies consistently outperforming the frontline heavyweights. As a result, investor bets are shifting more towards mid caps. According to consensus estimates, Nifty profits are expected to grow at just 5% in FY26, giving the benchmark index a price-to-earnings (P/E) ratio of 20x—higher than the five-year average.

According to consensus estimates for FY26, the revenue of the Nifty Midcap 150 is expected to rise by 11.7%, EBITDA (earnings before interest, tax, depreciation, and amortisation) by 16.9%, and net profit by nearly 21%. This compares with an 8.5% rise in revenue, an 8% rise in EBITDA, and a 20.8% increase in profits in FY25.

This earnings outperformance is also reflected in valuations. The earnings per share (EPS) of the index for FY26 is estimated at 765, pegging the forward P/E ratio at 28x—a 40% premium to the Nifty 50’s multiple.

A sectoral breakdown of the midcap Index reveals expected outperformers in FY26. Based on revenue growth of over 15% and PAT (profit after tax) growth of over 20%, sectors like auto and capital goods stand out.

Digging deeper, several companies are expected to post significant earnings growth as shown below.

• Real Estate: Prestige Estates, Oberoi Realty, and Godrej Properties.

• Healthcare: Max Healthcare is a standout performer.

• Capital Goods: Companies such as Hitachi Energy, GE Vernova, BHEL, Mazagon Dock Shipbuilders, APL Apollo Tubes, Waaree Energies, and Premier Energies are expected to deliver strong results, supported by capacity expansions.

• Consumer Services: GMR Airports and PB Fintech show promise.

• Financial Services: Muthoot Finance and BSE are expected to post strong earnings.

• Chemicals: The sector has been muted so far, but Linde India and Solar Industries India are projected to outperform.

• Consumer Durables: Companies like Kalyan Jewellers and Dixon Technologies are betting on increased consumer spending.

• IT: While frontline IT is expected to show muted growth, Coforge stands out in the midcap space.

• Auto: Sona BLW Precision Forgings, with exposure to both EV and ICE segments, is expected to see growth in FY26.

And then there are some sectors which are expected to be sluggish. These include the oil and gas, metal & mining, construction, construction material and FMCG.

These earnings expectations are based on analysts' projections for a wide range of midcap companies. However, not all mid caps have extensive analyst coverage yet. This is expected to change as more high-growth mid caps come under coverage. The threshold market cap for mid caps currently starts at around Rs 48,538 crore (approximately $5–6 billion), with the entire midcap universe valued at over Rs 86 lakh crore.

With strong growth tailwinds, mid caps are poised to outperform—provided they deliver on expectations. However, any shortfall in earnings delivery will likely be punished sharply by the market.

It’s Quick Earnings Delivery time for the mid caps!