Mid-cap and small-cap companies are expected to report strong earnings growth for the September quarter, outpacing large-caps even as overall sales growth remains broadly stable, analysts said.
Earnings momentum in the second quarter of FY26 is likely to be led by small-caps with profit after tax rising 30 percent year-on-year, followed by mid-caps with 16 percent and large-caps with 11 percent. Sales across the three categories are projected to rise between 6 and 8 percent, while EBITDA growth is expected to range from 3 to 13 percent.
Analysts said large-caps may see modest growth, supported by commodity-linked sectors and automobiles. However, mid- and small-cap firms are expected to post sharper profit expansion, aided by margin leverage, improving demand, and a low base effect.
Mid-cap profit growth will be broad-based, led by core sectors such as construction materials, real estate, information technology, energy, and financials. Real estate continues to gain from healthy pre-sales and better operating efficiency, while materials and specialty chemicals benefit from restocking and stronger realizations. IT firms are supported by new deal wins and tighter cost controls, and select non-banking finance companies continue to drive earnings within financials, analysts said.
Small-cap companies are projected to deliver the strongest earnings momentum, supported by cyclical recovery and improving consumption trends. Manufacturing, housing-related industries, and consumer discretionary segments are expected to post meaningful margin gains, reflecting better capacity utilization and healthier balance sheets.
Large-cap earnings growth is expected to remain stable, driven by steady performance in metals, energy, and automobiles. Gains from easing input costs and demand normalization are likely to be partially offset by muted performance in banking, IT, and consumer staples, where pressure on margins and volumes persists, analysts added.
Market and Macro View
Equities have traded in a narrow range in recent months as global concerns such as weaker growth and trade uncertainty were balanced by domestic positives including soft inflation, lower interest rates, tax relief, a strong monsoon, and ample banking liquidity.
Analysts believe the September quarter may remain soft, but the second half of FY26 could see stronger momentum supported by these tailwinds. Any resolution on US trade tariffs, coupled with improving corporate earnings, may revive foreign portfolio inflows — currently among the weakest in emerging markets — and provide a key boost to sentiment.
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