India Inc Earnings Estimates Revised Upwards on Strong Q2 Performance; FY26 Growth Projected at 9.8-10%

India Inc's September quarter (Q2 FY26) performance has prompted analysts to marginally upgrade earnings estimates for the current fiscal year by 50-60 basis points. Earnings for Nifty50 companies are now anticipated to grow by 9.8-10% in FY26, reflecting a neutral-optimistic outlook. Key companies like Reliance Industries, HDFC Bank, ICICI Bank, Ultratech Cement, and Dr Reddy’s Laboratories have seen their profit estimates raised. Some IT firms also benefited from a weaker currency.

Overall, corporate performance has been largely in line with expectations, with few major surprises or disappointments. Estimates for FY27 earnings, currently stable at 16.5-17% growth, could also be upgraded if the December quarter results are strong.

The upgrades are driven by a resurgence in topline growth and expanded operating profit margins. For a broad sample (excluding banks, financials, and oil marketing companies), net sales grew by 11% year-on-year, operating profits rose by 14%, and net profits increased by 13%.

Several companies reported strong growth, including Mahindra & Mahindra (21% net revenue growth), Bajaj Auto (13.7%), SAIL (16% net sales), Sun Pharma (9% topline), Titan (18% topline), and Interglobe Aviation (9.3% total income). However, Indian Hotels saw slower-than-expected revenue growth (12%) due to renovations and extended monsoon, while some consumer staples like Dabur (4.3% revenue growth) and retailer Trent (17% revenue growth, but decelerating) faced headwinds from GST rate changes and slower revenue per square foot. Weak volume growth for consumer staples in Q2 is expected to recover in the current quarter, with signs of modest urban demand revival. IT companies show stabilizing demand, though pricing pressures persist. Larger and mid-sized IT firms outperformed smaller ones.

Impact: This news has a positive impact on the Indian stock market as it suggests a healthier corporate earnings environment, potentially driving stock valuations higher. Increased earnings growth expectations can lead to greater investor confidence and a rally in equity markets. Impact Rating: 8/10

Difficult Terms: * Basis points: A unit of measure used in finance to denote the percentage change in a financial instrument. One basis point is equal to 0.01% (1/100th of a percent). * Nifty50: A benchmark Indian stock market index representing the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange of India (NSE). * FY26/FY27: Fiscal Year 2026 and Fiscal Year 2027, referring to the financial year typically running from April 1 to March 31. * Topline growth: Refers to an increase in a company's gross revenue or sales. * Operating profit margins: The percentage of revenue that remains after deducting the cost of goods sold and operating expenses. * Year-on-year (y-o-y): A comparison of financial data over a specific period (e.g., a quarter or a year) with the corresponding period in the previous year. * Consolidated revenue: The total revenue of a company and its subsidiaries, after eliminating intercompany transactions. * GST: Goods and Services Tax, an indirect tax levied on the supply of goods and services. * Consumer staples: Everyday items that consumers need, such as food, beverages, and toiletries, which are less affected by economic downturns. * Destocking: The process of reducing inventory levels. * Headwinds: Factors that hinder progress or growth. * Deal momentum: The ongoing process of securing new business contracts or projects.