Key Takeaways
- Nifty earnings show first upgrades after five quarters of declines
- Corporate profits beat estimates with 16.4% PAT growth
- Strong festive demand and GST rationalisation boost consumption
- Model portfolio favors banks, healthcare, consumer goods, autos, and defence
India’s corporate sector is witnessing a significant turnaround as earnings upgrades return after five consecutive quarters of downward revisions. The Nifty index shows positive revisions of 0.7% for FY26, 0.9% for FY27, and 1.3% for FY28, signaling a broad-based revival in corporate profitability.
Earnings Performance Exceeds Expectations
Corporate results for Q2 FY26 demonstrated remarkable resilience with companies recording 8.1% sales growth, 16.3% EBITDA growth, and 16.4% profit after tax growth. Most importantly, EBITDA and PAT surpassed estimates by 5% and 7.1% respectively, marking the first NIFTY EPS upgrades since August 2024.
“This marks a significant shift in sentiment and establishes early but clear signals of a broad-based revival in corporate profitability,” according to the report by PL Capital.
Sectoral Performance Highlights
The recovery has been widespread across sectors with particularly strong showings from:
- Hospitals and healthcare
- Capital goods and cement
- Electronics manufacturing services (EMS)
- Ports, NBFCs, and telecom
Commodity-linked sectors including cement, metals, and oil and gas posted exceptional profit expansions ranging between 33-58%.
Drivers of the Revival
Multiple factors are contributing to this earnings turnaround. The GST rate rationalisation introduced in September 2025 reduced effective retail prices across consumer categories, boosting spending in both urban and rural markets. Strong festive and wedding season demand has further accelerated domestic consumption.
The Nifty has risen 4% in the past three months, breaking out of a prolonged consolidation phase. The report estimates a 12-month Nifty target of 29,094 using a 15-year average PE of 19.2 times and September 2027 EPS estimate of 1,515.
Investment Strategy and Outlook
The model portfolio remains overweight on banks, healthcare, consumer goods, automobiles, and defence sectors. Underweight positions are maintained in IT services, commodities, and oil and gas.
While government capital expenditure has been a major economic driver – growing more than threefold since the pandemic – the report cautions that H2 FY26 might see some moderation. Capital spending in H1FY26 has already reached 52% of the annual target compared to 41% in the previous year.
The combination of GST rate rationalisation, higher fertiliser subsidies, and modest direct tax collections could limit the government’s ability to overshoot its current capex budget, creating potential headwinds for the latter part of the fiscal year.
