Nifty 50 earnings are expected to grow 27% year-on-year in Q2, marking the strongest growth in 17 quarters, Motilal Oswal said. The brokerage expects this recovery to be broad-based, with financials, metals, and telecom as key contributors. Despite global challenges, domestic fundamentals remain resilient as companies show strong profit growth.
The upcoming Q2FY27 earnings season is expected to bring a strong improvement in corporate profitability, with Nifty 50 aggregate earnings projected to grow 27% year-on-year (YoY), the highest growth in 17 quarters, domestic brokerage Motilal Oswal said ahead of the Q2 results.
The brokerage expects the earnings recovery to be broad-based, with financials, metals, oil and gas excluding OMCs, and telecom emerging as the key contributors.
It expects aggregate earnings for its coverage universe to rise 22% YoY, marking the highest growth in 11 quarters, while earnings excluding OMCs are expected to grow 24%, the strongest in 12 quarters.
Within its market-cap universe, large-, mid- and small-cap companies are expected to report profit after tax (PAT) growth of 23%, 11% and 29%, respectively. Excluding OMCs, PAT growth for the largecap and midcap universes is expected to be 25% and 20%, respectively.
Macro backdrop remains challenging
The earnings outlook comes against a more challenging backdrop for Indian equities. The relatively effortless climb seen through 2024 has given way to a tougher environment over the past two years, with global macroeconomic conditions, geopolitical tensions, trade and tariff disruptions, elevated energy prices, rising bond yields, inflation concerns and the beginning of a rate-hike cycle weighing on investor sentiment, the brokerage said in a note.
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The continued conflict in West Asia has also reduced visibility on crude prices returning to pre-war levels, keeping inflationary and broader macroeconomic risks elevated in the near term. The rise in global bond yields to a two-decade high is another concern, as tighter financial conditions and the growing relative attractiveness of developed markets could affect capital flows towards emerging markets.
Against this backdrop, global markets are dealing with several overlapping pressures, including geopolitical tensions, elevated energy prices, supply shocks, rising global debt, inflationary pressures, higher bond yields and the start of a global rate-hike cycle. At the same time, the AI-led technology boom, along with the related infrastructure and capex cycle, is drawing a disproportionate share of global capital flows and market outperformance, largely at the expense of other major sectors and economies.
The great India disconnect
For India, this has created a disconnect between resilient domestic fundamentals and persistent foreign outflows. High-frequency indicators such as GDP growth, IIP, GST collections, record-high forex reserves, strong credit growth, and auto and cement volumes continue to point to buoyant economic activity.
A resilient corporate earnings trajectory, strong domestic liquidity, a vibrant primary market and a robust deal pipeline further support the structural outlook for Indian equities.
However, persistent FII outflows from the secondary markets and subdued foreign investor sentiment remain key headwinds. This has been most evident in largecaps. After two years of heightened volatility, Indian equities have remained rangebound and undergone significant time and price corrections, with the Nifty 50, mid-cap and small-cap indices down 14%, 2% and 3%, respectively, from their September 2024 peaks.
As the Q2FY27 results season begins, the earnings trajectory comes into focus against a market that has been navigating a difficult global backdrop, even as domestic economic indicators remain resilient. The strong earnings growth expected by Motilal Oswal is led by a broad set of sectors, with Financials, Metals, O&G excluding OMCs and Telecom expected to provide key support in the quarter.
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(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
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