India Inc's September quarter earnings performance has been "unbelievably good", with companies across sectors reporting strong growth and smaller companies outperforming their large-cap peers, according to Prateek Agrawal, Managing Director and CEO of Motilal Oswal Asset Management Company (AMC).
Speaking to NDTV Profit, Agrawal said broader market earnings appear better than those of large-cap companies, adding that investors could potentially generate better returns by focusing on companies with a stronger growth outlook. He also highlighted the broad-based nature of corporate performance, with companies demonstrating strength across sectors.
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His comments come against the backdrop of a recovery in corporate earnings, with Motilal Oswal Financial Services (MOFSL) reporting stronger-than-expected growth in its interim review of the second quarter of FY27.
According to the brokerage's analysis, corporate earnings have sustained their growth momentum in Q2FY27, building on the meaningful recovery witnessed in the first quarter after nearly two years of muted performance.
Broader Markets Earnings Outperform Large-Caps
The earnings recovery has been particularly encouraging beyond large-cap companies. According to MOFSL's analysis, small-cap companies in its coverage universe reported earnings growth of 34% year-on-year, outperforming mid-cap companies, which recorded 26% growth. Large-cap companies, meanwhile, reported earnings growth of 30%.
The performance also exceeded MOFSL's estimates across market capitalisation categories. Small-cap earnings growth was higher than the brokerage's estimate of 28%, while mid-cap earnings growth surpassed its estimate of 23%.
The brokerage analysed results declared by 230 companies in its coverage universe and 35 companies in the Nifty as of October 31, 2026. These companies accounted for 50% of India's market capitalisation and 74% of the Nifty's weightage.
At the aggregate level, sales, EBITDA and net profit of the 230 companies in the MOFSL universe grew 26%, 24% and 33%, respectively, exceeding the brokerage's estimates of 19%, 14% and 19%. The earnings growth was the highest in 12 quarters.
Excluding oil marketing companies (OMCs), earnings growth stood at 30%, compared with the brokerage's estimate of 22%.
BFSI, Metals And Oil & Gas Lead Earnings Growth
The banking, financial services and insurance (BFSI), metals, and oil and gas sectors were the biggest contributors to incremental earnings growth, accounting for 78% of the overall increase.
Healthcare and cement were the only sectors that dragged down the aggregate performance.
Among Nifty companies, earnings grew 22% year-on-year, ahead of MOFSL's estimate of 20%. Reliance Industries, JSW Steel, ICICI Bank, Coal India and Axis Bank were the key contributors, together accounting for 59% of incremental earnings growth.
The brokerage also highlighted a favourable earnings beat-miss ratio. Around 43% of companies in its coverage universe exceeded estimates at the profit-after-tax level, while 24% reported a miss. Among mid-cap and small-cap companies, 41% and 46%, respectively, beat estimates.
Nifty Earnings Estimates Revised Higher
The improving earnings outlook has also prompted MOFSL to revise its Nifty earnings estimates upwards.
The brokerage raised its FY27 Nifty earnings per share (EPS) estimate by 1.1% to Rs 1,247, largely driven by upgrades to Reliance Industries, JSW Steel, HDFC Bank, Bajaj Auto and Kotak Mahindra Bank.
Its FY28 EPS estimate was also raised 1.6% to Rs 1,428 from Rs 1,406, supported by upgrades in Reliance Industries, HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank.
Broader Markets: Recent Performance
Despite the improving earnings outlook, mid-cap and small-cap indices have faced pressure over the recent three-month period.
The Nifty Smallcap 100 index gained 2.6% over the past week but remained down 3.5% over one month and 5.7% over three months. The Nifty Midcap 100 index advanced 1.48% in a week but declined a little over 3% in one month and 10% over three months.
On Monday, however, broader markets participated in the recovery, with the Nifty Smallcap 100 rising 0.8% and the Nifty Midcap 100 gaining 1.09%.
The benchmarks extended gains. Sensex was trading 870 points, or 1.1%, higher at 75,327, while the Nifty 50 advanced 1.09% to 23,304.
READ | Stock Market Today: Sensex Rallies 1,000 Points, Nifty 50 Near 23,350; RIL Gains 8%; ITC Q2 Eyed
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