India's corporate earnings delivered their best quarter in nearly three years, yet stock markets declined as Nifty 50 settled at 24,287.65, down 78.35 points or 0.32%, while Sensex slipped 0.36% to close at 77,728.16. According to The Hindu BusinessLine, the index touched an intraday low of 24,226.95 before recovering partially in afternoon trade, with Nifty closing below its 20-day simple moving average for the first time in a while. Elevated crude prices and geopolitical uncertainty warrant near-term caution, while resilient earnings and strong domestic structural themes continue to support the medium-term outlook, said Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services. The session's sectoral story was sharply divided, with Nifty Realty gaining 1.46% and Nifty Metal climbing 1.26%, while IT shed 1.75% and FMCG fell 1.05%. Broader markets held up better, with Nifty Midcap 100 ending nearly flat and Nifty Smallcap 100 advancing 0.36%, reflecting selective buying interest away from large-cap heavyweights.
India Inc. witnessed broad-based earnings strength in the first quarter of FY27, with 19 sectors exceeding expectations and financials, metals, oil and gas excluding OMCs, and automobiles emerging as key growth drivers, according to Motilal Oswal's comprehensive analysis. The Nifty delivered 18% year-on-year PAT growth, marking a 10-quarter high and significantly exceeding Motilal Oswal's estimate of 10%, as reported by Zee News. Aggregate earnings growth stood at 13% year-on-year (YoY), as reported by BofA in their strategy report. Large-cap companies in the MOFSL Universe reported 21% year-on-year earnings growth against the estimated 14%, while mid-caps recorded 23% growth, marking an 11-quarter high, and small-caps delivered 31% growth, compared with the brokerage's estimate of 22%. Around 48% of companies in the MOFSL Universe exceeded estimates at the PAT level, while 25% reported a miss, with 57% of large-caps, 39% of mid-caps and 48% of small-caps beating expectations. The upgrade-to-downgrade ratio improved to 1.5, implying that 15 companies were upgraded for every 10 downgrades, signalling a broad-based improving profit outlook for the rest of the fiscal year, according to The Hindu BusinessLine.
Mid-cap and small-cap companies delivered exceptional performance in Q1 FY27, posting their sharpest revenue growth in 16 quarters despite rising commodity prices. According to The Economic Times, of the sample of 113 companies in the Nifty MidCap 150 index, aggregate revenue climbed 20%, its biggest jump since June 2022, from the same period a year ago. Operating profit rose 27%, extending its streak of double-digit growth to 13 quarters, while aggregate net profit surged 23% year-on-year, marking the second consecutive quarter of double-digit growth. Within midcaps, metals, technology, pharma and select companies were among the stronger contributors. The small-cap segment recorded even stronger performance, with aggregate net profit surging 42.5% year-on-year, its biggest jump in six quarters, while revenue rose 19.3% and operating profit increased 27.5%. Within smallcaps, chemicals, metals, building materials, auto and select industrial and consumer-facing businesses led the earnings growth. Total costs increased 17.2% year-on-year for mid-caps and 18% for small-caps, the sharpest rise in 13 and 14 quarters respectively, as reported by The Economic Times.
Despite widespread earnings surprises, profit expansion remained clustered with five companies accounting for 60% of incremental earnings growth, according to The Economic Times. The five biggest sector contributors generated 73% of the incremental profit in Motilal Oswal's universe during the quarter, with ONGC, Hindalco Industries, Reliance Industries, JSW Steel and Bharti Airtel leading the charge. Oil and gas companies excluding OMCs contributed ₹16,900 crore to the year-on-year profit increase, followed by metals at ₹15,700 crore. Non-bank lenders added ₹8,000 crore, private sector banks ₹7,300 crore and state-run banks ₹3,900 crore to the overall profit growth. Metals produced one of the sharpest turnarounds, moving from being among the bottom 10 profit contributors a year earlier to the second largest contributor in the June quarter, with Hindalco's profit increasing 118%, JSW Steel posting 96% growth and Vedanta's profit surging 152%. The brokerage's coverage universe, excluding oil-marketing companies, recorded sales, Ebitda and profit growth of 18%, 15% and 22% respectively, demonstrating the underlying strength of the domestic economy.
The robust earnings performance fueled significant gains in mid-cap and small-cap stocks, with the Nifty MidCap 150 and Nifty SmallCap 250 gaining 17% and 24.5% respectively during the quarter. According to The Economic Times, in comparison, the Sensex gained nearly 6.3% during the quarter, while the Nifty advanced 6.8%. Market participants said the earnings growth is supporting the elevated valuations of mid-cap and small-cap stocks. The Nifty's current estimated Price to Earnings (PE) ratio is at 22 times, compared with its 10-year average of 23.5 times. The Nifty MidCap 150's PE ratio based on reported earnings stood at 33 times, against its five-year average of 34, while the Nifty SmallCap 250's stood at 32 times, above its five-year average of 29 times. Festive demand, GST-related consumption support, credit expansion and investment activity are key factors expected to underpin fiscal 2027 earnings, the brokerages said, as reported by The Hindu BusinessLine. Lenders benefited from faster loan growth, low credit costs and operating leverage, according to Jefferies, while non-bank lenders saw robust growth in assets under management and broadly benign asset quality.
Small-cap companies (186 companies) outperformed significantly, delivering strong earnings growth of 31% YoY as compared with estimates of 22%, supported by a favorable base and led primarily by Financials and Oil & Gas sectors. Multiple small-cap sectors, such as NBFC-Lending, Private Banks, Oil & Gas, NBFC-Non-Lending, and Chemicals, lifted the overall performance, contributing ~69% to the incremental YoY accretion in earnings, as reported by The Economic Times. Motilal Oswal raised Nifty EPS estimate for FY27 by 0.6% to ₹1,232, largely owing to Reliance Industries, Hindalco Industries, ONGC, ICICI Bank, and State Bank of India (SBI). The FY28E EPS was also raised by 0.3% to ₹1,425 from ₹1,422, due to upgrades in SBI, ICICI Bank, Hindalco Industries, Bajaj Finserv, and Bajaj Auto. Within Nifty 50, MOFSL's top stock ideas include Bharti Airtel, ICICI Bank, SBI, Titan Company, Mahindra & Mahindra (M&M), Bharat Electronics, Eternal, Hindalco Industries, Shriram Finance, InterGlobe Aviation, and Apollo Hospitals. Among non-Nifty 50 companies, the brokerage picks TVS Motor Company, BSE, GE Vernova T&D, HDFC AMC, Lenskart Solutions, Indian Hotels, Meesho, Dixon Technologies, Coforge, Radico Khaitan, Delhivery, Kirloskar Oil Engines, RBL Bank, TBO Tek, and Arvind.
FMCG companies finally found their pricing power after years of struggling to pass through cost increases, with revenue growth accelerating to 15.1% year-on-year from 10.7% in the previous quarter, as reported by Anand Rathi. The recovery was relatively well balanced, combining mid-to-high single-digit volume growth with calibrated price hikes, aided by the GST cut, improving sentiment and continued premiumisation. Companies were selective about where they raised prices, with larger packs and premium products absorbing most of the increases, while entry-level price points remained largely protected, a strategy aimed at keeping rural and price-sensitive demand intact. Paints also performed well, with growth rising to 14.2% from 7.6%, while with crude oil prices easing below $100 a barrel, the brokerage expects margins across FMCG, paints, alcobev and QSRs to look even better in the second half. This marks a significant turnaround for the FMCG sector, which has been under pressure from rising input costs and competitive dynamics.
