Moneycontrol Pro Weekender | What Q3 results reveal about India's growth trajectory

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Dear Reader,

Q3 earnings suggest a clear inflection point, with broad-based acceleration in both sales growth and profitability. CMIE data show that net sales growth in the non-financial corporate sector is the highest in many quarters and so are profits after adjusting for one-off items. Profits of the financial services sector too have done very well in the aggregate. Policy support, corporate conviction, and global tailwinds are now reinforcing one another.

The GST rate cuts were a big catalyst for demand. Take the auto sector results. On M&M, we wrote, “The company is proactively scaling up its manufacturing footprint to align with rising demand and its expanding product portfolio.” We said, writing on the Ashok Leyland results, “Improved consumption has led to higher freight movement, which in turn has supported freight rates and strengthened the overall industry momentum.” We pointed to the multiple tailwinds that are driving a strong upcycle in commercial vehicles, aided by an export surge fuelling domestic CV makers’ earnings prospects. Bosch Ltd, a leading player in automotive components with strong linkages to the CV segment, delivered a steady performance in Q3FY26. Similarly, ZF Commercial Vehicle Control Systems India Ltd, a leading provider of integrated braking, safety and control technologies for commercial vehicles, is leveraging the CV recovery.

Royal Enfield's 21 percent volume surge wasn't just about lower prices; it reflected latent demand waiting for the right trigger. Hero Motocorp's continued rural dominance demonstrated that stimulus reached deep into the hinterland.

In the FMCG segment, Britannia Industries managed healthy top-line growth aided by GST changes while Emami saw sharp sequential improvement following the rate reduction. HUL’s volume growth in Q3 was the highest in 12 quarters though we also pointed out that the FMCG market may have pockets of growth but it’s not out of the woods yet.

But perhaps the most bullish signal in Q3 wasn't quarterly performance but forward-looking capital allocation. Companies across sectors are committing massive investments based on conviction that current momentum is durable. In the defence sector, Bharat Dynamics is doubling production capacity over 3-5 years. Indeed, the defence sector, in these troubled times, reflects India’s industrial coming of age and is a major source of capex.  HAL's Rs 2.5 lakh crore order book ensures revenue visibility until 2032 -- the Tejas Mk1A programme, with a requirement of 180 aircraft, is driving this growth. GRSE's order book stands strong at Rs 18,482 crore, representing 3.6 times its annual revenue. The company has accelerated execution, delivering five major warships in the last nine months. Data Patterns’ growth is part of a larger strategy to capture a Rs 15,000-20,000-crore market opportunity as India accelerates its shift towards high-value, indigenous defence technology. And Bharat Forge’s defence and aerospace businesses are “evolving from optional growth levers to core earnings drivers, fundamentally reshaping the company's medium-term trajectory”. This strategic repositioning by blue-chip industrials validates Aatmanirbhar Bharat.

Beyond defence, Apollo Hospitals is adding 1,660 beds by FY27 with Rs 3,505 crore investment. Tata Steel's board approved long-products expansion targeted for FY30 completion, plus 2.5 million tonnes capacity at Meramandali by FY29.

This coordinated investment wave signals Corporate India's confidence that policy support and infrastructure spending will sustain demand over a long period.

Add to this the removal of the overhang on India’s labour-intensive exports to the US, which will not only preserve jobs and shore up consumption, but also boost the export effort. Our columnist Vivek Kelkar wrote, “What emerges is a picture where India has avoided a damaging escalation, protected its most sensitive sectors and added some momentum to its export strategy.” We noted: “The boost to exports from trade deals with the US and Europe is making companies build capex plans, a boon for banks.”

In short, the environment has vastly improved. The Reserve Bank of India’s latest Bank Lending Survey for the December quarter shows that loan demand is broad-based, appetite spans manufacturing, infrastructure, services and retail, and lenders are increasingly comfortable loosening terms.

Indeed, SBI’s Q3 results mirror this fact as the bank has long been a proxy for the economy. SBI's record quarterly profit and operational excellence provide the financial foundation for sustained economic expansion.

Q3 FY26 demonstrates India's economy has shifted decisively into expansion mode. Policy catalysts generated genuine demand that's sustaining beyond initial stimulus. Companies are confidently committing billions to capacity expansion. Trade deals are opening export markets. Defence has emerged as globally competitive with decade-long visibility.

Of course, risks remain, ranging from geopolitics to trade disruption to the AI threat. The last one, in particular, has roiled markets recently. The NSE IT index is down over 14 percent year to date. Anthropic's Claude ‘Cowork’ has raised questions about automation's impact on India's software services industry. Arguments on the real impact of AI are raging. An FT story this week, free to read for Moneycontrol Pro subscribers, says, “As with previous waves of tech disruption, the most exposed are those whose basic product is information — finance, legal services, media and software.” Others point out that Indian IT services firms have consistently adapted to disruption, often emerging stronger.

All these uncertainties are reflected in the gold boom. In India, the boom has affected different players in different ways. On the one hand, given the sharp increase in gold prices, Titan is light-weighting as well as introducing low-carat jewellery to retain price points, thereby sustaining growth. For Sky Gold & Diamonds, the steep increase in gold prices led to higher realisations, with overall revenues growing at a much faster clip. And Muthoot Finance looks set to surpass its full-year gold loan growth target for FY26. Gold ETF inflows are at a record high. On the other hand, we pointed out that gold's meteoric rise has triggered a crisis across India's jewellery industry, with small retailers haemorrhaging sales while organised chains thrive amid the turmoil.

In short, Q3 FY26 marks the inflection point where multiple growth drivers began working simultaneously. The cycle has turned; the question now is who has the conviction to invest ahead of it.

Cheers,

Manas Chakravarty

In case you missed them, here are some of the other stories and insights we published this week, apart from our technical picks in the equity, commodity, and forex markets:

Stocks

Indian Hotels, LG Electronics India, Jyoti CNC, Lenskart, Divi’s Lab, V2 Retail, Pidilite, Carysil, Fractal IPO, Why investors can give Aye Finance IPO a miss, Max Healthcare, Kaynes Technology, NCC

Markets

Is it time to increase allocation to gold?

New demat account openings hit 16-month high in January despite market volatility

How home-grown money is transforming Indian markets

This is a year for stock picking: Kenneth Andrade

Financial Times

The market meltdown in data companies is profoundly wrong

Ruchir Sharma: Bash all day, buy all night

How AstraZeneca shot for the moon — and hit

Ping! The WhatsApps that should have been an email

Companies & Sectors

Textile stocks have soared, but is Bangladesh about to steal the show?

What’s behind Marico’s seemingly insatiable appetite for acquisitions?

FORGE a pact and Vault past the rare earth paradox

Apollo Hospitals

A steady start to 2026 for India pharma market

Rubber prices ease, tyre firms breathe easy

Page Industries

Will the new US-Bangladesh trade deal punch a hole in Indian textile designs?

A money market corner becomes indispensable for deposit growth

Economy & Policy

New CPI series reaffirms benign inflation scenario, but extended pause on policy rate likely

Uptick in month-on-month new CPI signals price pressures in January

Twin trade deals — How India is playing Europe, America differently

Why India teamed up with US to gain access to critical minerals

RBI survey shows a nervous urban consumer, but help is around the corner

Deposit insurance body's risk-based pricing rewards banking discipline

RBI passes growth baton to government after Budget, trade deals

CAFE3 U-Turn: Why scrapping small car exemptions could price out India's first-time buyers

Pro Economic Tracker

Tech & Startups

Brokerages bullish on Bajaj Finance’s AI thrust, say operational efficiencies will see boost

Startup Street | Who's better at entrepreneurship — homegrown or overseas returnees?

Six of 10 brokers add active investors in January; Groww leads with 3.5 lakh, highest in over a year

Oracle optimistic about India-US trade deal, to launch 3 multi-cloud data centres by April: India head Shailender Kumar

Others

Personal Finance: To rebalance or not, in uncertain times