Large Indian Companies Show Slower Earnings Growth Than Broader Market

Analysis of the current earnings season indicates that larger companies, specifically those within the top 100 Nifty constituents, are experiencing a slower pace of growth in both sales and operating profits. This trend is distinct when compared to the performance of a broader universe of 653 companies.

The disparity is most evident in net profits. For the second quarter of the financial year 2025-2026 (Q2FY26), 56 of the larger firms reported an average net profit increase of 15.7% year-on-year. In contrast, the larger basket of 653 companies achieved a more robust year-on-year net profit growth of 20.4%.

Sectors like Fast-Moving Consumer Goods (FMCG) and Information Technology (IT) have posted relatively sedate financial results. Conversely, companies in the metals, durables (long-lasting consumer goods), and Oil Marketing Companies (OMCs) sectors have reported strong outcomes.

Impact This divergence in performance could suggest that smaller and mid-sized companies, or those in specific high-growth sectors, are currently outpacing their larger, more established counterparts. Investors may need to re-evaluate sector allocations and consider growth potential beyond just the blue-chip companies. The differing performances across sectors also highlight varying economic conditions affecting different industries.

Impact Rating: 7/10

Difficult Terms Explained: - Nifty pack: Refers to companies included in the Nifty 50 or Nifty 100 stock market indices, which represent large-cap companies in India. - Sales: The total revenue generated from the sale of goods or services in a particular period. - Operating profits: Profit generated from a company's core business operations before accounting for interest and taxes. - Net profits: The profit remaining after all expenses, including interest and taxes, have been deducted from revenue. - Year-on-year (YoY): A method of comparing financial data by looking at the current period's results versus the same period in the previous year. - Q2FY26: The second quarter of India's financial year 2025-2026, typically covering the months of July, August, and September. - FMCG firms: Fast-Moving Consumer Goods companies, which sell products that are consumed quickly and are relatively inexpensive, such as food, beverages, toiletries, and over-the-counter drugs. - Sedate numbers: Indicates figures or growth rates that are moderate, calm, or not particularly high or low. - Durables: Refers to goods that are expected to last for a long time, such as refrigerators, washing machines, and furniture. - OMCs: Oil Marketing Companies, businesses involved in the refining, distribution, and marketing of petroleum products.