The June quarter earnings so far has been broadly in-line with a moderating intensity of earnings cuts, a Motilal Oswal note said on August 4.
Along with more in-line results, the intensity of earnings cuts has moderated compared to previous quarters. One encouraging sign has been the expectation of the Nifty 50 EPS growth likely rising to nearly 10 percent in FY26 as against an anemic one percent growth in FY25, helped by better macro environment following stimulative fiscal and monetary steps in the Union Budget, and then by the RBI, the note said.
Motilal Oswal added that it expects US tariffs to have a limited impact on Indian markets, supported by 'better earnings prospects and reasonable valuations', expect for the smallcap space, which should help the markets eke out gains. Key indices have seen an impressive recovery from April 2025 lows and despite a weak July, gains should sustain. "We believe that the influence of the US tariff wars on Indian markets will be limited. The Nifty trades at 22.1x FY26E earnings, near its LPA of 20.7x," the note added.
"While our model portfolio bias remains towards largecaps (~70% weight), we have turned more constructive towards midcaps (with 22% weight vs 16% earlier) owing to better earnings delivery and improving prospects. We are Overweight on BFSI, Consumer Discretionary, Industrials, Healthcare & Telecom, while we are Underweight on Oil & Gas, Cement, Real Estate, and Metals," MOSL added.
As of August 1, as many as 38 Nifty companies and 184 companies from the MOFSL coverage universe have reported results for the June quarter. These make up for 67 percent and 77 percent of the estimated PAT for the MOFSL and Nifty Universe, respectively. They also represent 49 percent of India's market capitalization.
The Nifty EPS for FY26E has been lowered by 1.1 percent to Rs 1,110, with FY27E EPS too slashed by 0.8 percent to Rs 1,297 compared to Rs 1,308 a year ago.
Top Upgrades and Downgrades
For MOSL, its top FY26E upgrades after the June quarter earnings include Tata Consumer, Eicher Motors, IndusInd Bank, Wipro and ICICI Bank, while top downgrades are Eternal, Axis Bank, Power Grid, Sun Pharma and Nestle. Compared to largecaps, the midcaps in MOSL coverage universe have posted an earnings growth at 12% on year, higher than the estimate, while in comparison, largecaps posted an earnings growth of 7 percent on year.
Smallcaps are still experiencing weakness and broad-based miss said MOSL, with private banks, NBFCs, automobiles and Oil & Gas posting earnings declines. "The smallcap earnings dipped 9% YoY (our estimate of +3%), with 45% of the coverage universe missing our estimates. On the other hand, within the large/midcap universes, 29% / 20% of the companies missed our estimates," MOSL note said.
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