Strong Q2 Performance Drives Earnings Upgrades for Indian Companies
India’s corporate sector delivered a robust performance in the September quarter, prompting analysts to upgrade earnings estimates for FY26 by 50-60 basis points. Nifty50 companies are now projected to achieve 9.8-10% earnings growth this fiscal year.
Key Takeaways
- Nifty50 FY26 earnings growth upgraded to 9.8-10%
- Operating profit margins expanded by 51 basis points
- Net profits rose 13% year-on-year across 1,059 companies
- FY27 estimates remain stable at 16.5-17% growth
Major Companies Receiving Upgrades
Several blue-chip companies saw profit estimate increases, including Reliance Industries, HDFC Bank, ICICI Bank, Ultratech Cement, and Dr Reddy’s Laboratories. Select IT companies also received forecast upgrades due to improved margins supported by currency tailwinds.
Revenue and Margin Growth Drivers
The earnings upgrades were primarily driven by strong topline growth and expanding operating margins. Excluding banks, financials, and oil marketing companies, a sample of 1,059 firms recorded:
- 11% year-on-year net sales growth
- 51 basis points operating margin expansion
- 14% operating profit increase
- 13% net profit growth
Sector-Specific Performance
Automobiles: Mahindra & Mahindra reported 21% revenue growth with 16% volume increase, while Bajaj Auto saw 13.7% growth.
Metals & Pharma: SAIL achieved 16% sales growth, while Sun Pharma reported 9% topline increase.
Consumer & Travel: Titan’s revenue surged 18% due to strong festive jewelry sales. InterGlobe Aviation (IndiGo’s parent) reported 9.3% income growth, exceeding estimates.
Mixed Consumer Sector Performance
Some consumer-facing companies faced challenges. Indian Hotels’ 12% revenue growth disappointed markets, attributed to renovations and extended monsoon. GST-related changes impacted several players:
- Dabur’s standalone volumes grew only 2%, with revenue up 4.3%
- Trent’s revenue growth decelerated to 17% with 17% drop in revenue per square foot
Recovery Signs and IT Sector Stability
Consumer staples companies expect volume recovery in the current quarter after GST-related destocking issues in Q2. Management commentary indicates modest urban demand revival.
IT sector results show stabilizing demand trends with reduced headwinds and fewer project cancellations. While pricing pressures persist in some areas, deal momentum remains steady. Motilal Oswal strategists noted larger and mid-sized companies outperformed smaller firms in their coverage universe.
