Did India Q2 FY26 Earnings Surpass Expectations Thanks to Midcaps?
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Synopsis
In a surprising turn of events, the second quarter of FY26 has delivered earnings that have outshone expectations, primarily due to the robust performance of midcap companies. This article dives into the significant factors contributing to this growth and the overall market sentiment.
Key Takeaways
- Midcaps experienced a 26% earnings surge.
- Large-cap earnings grew by 13%.
- Smallcaps lagged with a 3% increase.
- Oil and gas sector profits rose by 79%.
- Cement sector profits soared by 147%.
Mumbai, Nov 6 (NationPress) The second quarter (Q2) of FY26 has witnessed earnings that went beyond forecasts, largely propelled by remarkable midcap growth, even with some underperformance in certain smallcap sectors, according to industry data.
Brokerage firm Motilal Oswal Financial Services reported a 14% year-on-year earnings increase among companies that have announced results so far, which aligns closely with market expectations.
Large-cap earnings experienced a 13% growth, consistent with the broader market trends, while mid-caps surpassed projections with an impressive 26% increase, bolstered by sectors like technology, cement, metals, PSU banks, real estate, and non-lending NBFCs.
In contrast, smallcaps showed a modest 3% growth as private banks, non-lending NBFCs, technology, retail, and media sectors affected their performance. Nevertheless, 69% of smallcaps met or exceeded predictions, as opposed to 84% of large caps and 77% of mid-caps, the data indicated.
Sectoral performance analysis revealed that the oil and gas and cement sectors recorded the highest gains, with state-run fuel retailers achieving a 79% profit increase, while cement profits soared by 147%.
Additionally, technology profits rose by 8%, capital goods by 17%, and metals by 7%, together contributing over 80% of the overall profit growth.
Earnings for 27 Nifty companies that have reported results increased by 5% year-on-year, driven by HDFC Bank, TCS, JSW Steel, and Infosys, while Coal India, Axis Bank, HUL, Kotak Mahindra Bank, and Eternal hindered performance. Out of the Nifty constituents, seven fell short of estimates, five exceeded forecasts, and 15 met expectations.
According to the MOFSL report, "Earnings upgrades have outnumbered downgrades for the first time in several quarters, indicating a healthier market environment and enhanced confidence in India's corporate profitability trajectory.
Although the headline indices remain stable after a subdued year, the fundamental indicators are showing improvement, supported by reducing earnings cuts, diversified sectoral leadership, and strong midcap performance, the report added.
Point of View
It is crucial to recognize that the earnings report for Q2 FY26 reveals a nuanced picture of the Indian economy. While midcaps show remarkable resilience, the performance of smallcaps raises questions about sector-specific challenges. This report highlights the potential for growth in a diversified market landscape, calling for a cautious yet optimistic outlook.
NationPress
06/11/2025
Frequently Asked Questions
What drove the earnings growth in Q2 FY26?
The earnings growth in Q2 FY26 was primarily driven by strong midcap performance across sectors such as technology, cement, and metals.
How did largecaps perform compared to midcaps?
Largecaps experienced a 13% earnings growth, while midcaps outperformed with a remarkable 26% increase.
What sectors showed the highest gains?
The oil and gas and cement sectors recorded the highest gains, with cement profits surging by 147%.
What does the earnings report indicate about market confidence?
The earnings report indicates improving market confidence, as upgrades have outnumbered downgrades for the first time in several quarters.
How did smallcaps perform in this earnings season?
Smallcaps showed a modest 3% growth, with 69% meeting or exceeding forecasts despite some underperformance in certain sectors.
