The Q2 FY26 corporate earnings concluded on a healthy note, with overall earnings growth driven by OMCs, telecom, metals, technology, NBFCs – lending, cement, and capital goods. Conversely, oil and gas (ex-OMCs), automobiles (led by Tata Motors), and banks (private and PSU) dragged overall profitability.
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Motilal Oswal Report
The Q2 FY26 earnings have generally been in line with our expectations, with the intensity of earnings cuts moderating. Although Indian equities have registered a lackluster performance over the past one year, we continue to emphasize that the Indian markets now appear healthier compared to last year.
The earnings cycle is bottoming out, with growth expected to accelerate into double digits.
Valuations remain reasonable, with the Nifty trading at 21.2x, near its LPA of 20.8x. Any signs of accelerating earnings growth should support valuation expansion.
We believe that the cavalry of measures by the government will help reset the trajectory of corporate earnings, as domestic reforms are expected to continue.
Additionally, any resolution of the tariff stalemate will be a key external catalyst, in our opinion.
Our model portfolio is more aligned towards domestic names, driven by expectations of a domestic economic rebound. While smaa and midcap stocks trade at expensive valuations, we continue to focus on this segment, selectively picking high-conviction SMID names in our portfolio.
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