JPMorgan said small and mid-cap companies will likely beat large caps in the second quarter. The firm expects a 16% profit increase for its universe. Strategist Rajiv Batra noted that domestic demand and festive inventory build-up helped these firms. They now prefer sectors like financials and industrials over information technology.
Small- and mid-cap companies are poised to outpace India's front-line benchmarks in bottom-line growth during the second quarter, as corporate earnings momentum sustains a durable double-digit expansion, according to JPMorgan.
In its India Strategy note authored by strategist Rajiv Batra, the global brokerage outlined an explicit preference for mid- and small-caps over large caps heading into the July–September earnings season. The firm noted that broader domestic macroeconomic tailwinds and favourable operating leverage continue to offer a stronger runway for nimble, domestic-oriented enterprises.
For the second quarter of the fiscal year 2026–27, JPMorgan forecasts Nifty 50 earnings to expand by 17% year-on-year, while the wider JPMorgan Universe is projected to deliver a 16% year-on-year increase in profit after tax. This sustained double-digit expansion indicates that corporate India's fundamental earnings cycle remains healthy despite ongoing global economic uncertainties.
According to the brokerage, the earnings trajectory will be supported by three key domestic drivers: resilient local consumer demand, an early build-up of inventory ahead of the festive season, and favourable pricing realisations across select commodity-linked industries. Pre-festive channel filling, in particular, is anticipated to lift quarterly sales volumes, wholesale dispatches, and operating cash flows across consumer supply chains.
Capex, AI And Cyclicals Drive Outperformance
JPMorgan identified capital expenditure, modern manufacturing, and artificial intelligence-linked data centers as the three most compelling high-growth structural themes in the market today. Companies operating within these sectors are experiencing sustained order inflows and enhanced capacity additions, providing mid-sized industrial, electrical, and infrastructure firms with an added operational advantage.
In terms of portfolio positioning, the brokerage maintains an overweight stance on Financials, Consumer Discretionary, Industrials, Health Care, and Materials. Conversely, JPMorgan stays underweight on the Information Technology sector, signaling continued caution on software exporters as clients in key overseas markets delay discretionary technology spending and transformation contracts.
Aggregate profit after tax growth across the coverage universe is broadly expected to be led by materials and logistics, with the metals segment anticipated to deliver particularly strong performance. Substantial contributions are also projected from healthcare facilities and hospital chains, retail and discretionary consumption, industrials, and financial institutions, which together form the bedrock of the quarter's profit expansion.
With festive demand arriving early, selective pricing power holding firm, and cyclical sectors benefiting from domestic capital expenditure, mid- and small-cap companies appear well placed to translate top-line momentum into superior operating profit expansion.