Nifty companies have delivered a stronger-than-expected start to the first-quarter earnings season, with profits of the 39 index constituents that have reported results so far rising 11% year-on-year, according to domestic brokerage Motilal Oswal.
The brokerage said that the growth has outpaced its expectation of 7% and reiterated its top Nifty picks, including Bharti Airtel, SBI, ICICI Bank, M&M, Titan, Eternal, Shriram Finance, Bajaj Finance and InterGlobe Aviation, its said in its August strategy note.
The brokerage said the earnings growth has been driven largely by Reliance Industries, JSW Steel, ICICI Bank, Bajaj Finance and Axis Bank. Together, these five companies accounted for 59% of the incremental year-on-year earnings growth. On the other hand, InterGlobe Aviation, ITC, Dr Reddy's Laboratories, Cipla and Maruti Suzuki weighed on Nifty earnings during the quarter.
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Of the 39 Nifty companies that have declared results so far, 20 reported profits above Motilal Oswal's estimates, 13 delivered earnings in line with expectations, while six missed estimates.
Largecaps vs smallcaps vs midcaps
Within the broader Motilal Oswal coverage universe, largecap companies continued to outperform expectations. The brokerage said 65 large-cap companies posted earnings growth of 6% year on year against its estimate of an 8% decline. Midcap companies, however, reported a 31% fall in earnings, in line with estimates, primarily due to losses in oil marketing companies within the oil and gas sector.
Excluding oil marketing companies, largecap and midcap earnings grew 15% and 25% year on year, respectively, ahead of the brokerage's estimates of 11% and 20%.
Smallcap companies also delivered a healthy performance. The brokerage said earnings for 90 smallcap companies rose 32% year on year, beating its estimate of 26%, aided by a favourable base and led by financial companies. Excluding financials, smallcap earnings grew 12% against an estimate of 11%.
More positives than negatives
The earnings season has also seen a favourable beat-to-miss ratio. Across the Motilal Oswal coverage universe, 49% of companies exceeded profit estimates, while 22% missed. The beat ratio was stronger among largecaps and smallcaps, where 57% and 51% of companies, respectively, reported earnings above estimates. Among midcaps, 36% of companies delivered a beat.
The brokerage added that earnings revisions have remained positive so far, with 70 companies receiving upgrades of more than 3% to FY27 estimates compared with 45 companies seeing downgrades, resulting in an upgrade-to-downgrade ratio of 1.6 times.
Market strategy
Commenting on the broader market, Motilal Oswal said Indian equities have undergone a prolonged phase of volatility and consolidation over the past two years amid uncertainty surrounding US trade tariffs, domestic policy changes, energy price shocks and supply disruptions arising from the West Asia conflict. It also flagged the strong pipeline of large IPOs and capital raising as an important test for market liquidity.
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Despite the macro challenges, the brokerage said it continues to view the market as a bottom-up stock picker's market.
Apart from its preferred Nifty names, it identified TVS Motor, Radico Khaitan, Indian Hotels, RBL Bank, Dixon Technologies, Coforge, Kirloskar Oil Engines, Arvind, TBO Tek, Delhivery, HDFC AMC, Meesho and BSE as its top non-Nifty investment ideas.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
