Large and Mid-Cap Companies Outperform Small-Caps in Q2 FY26 Earnings Growth

An analysis of quarterly results for the July-September quarter of FY26 by Motilal Oswal Financial Services (MOFSL) reveals that large and mid-cap companies have demonstrated better performance than small-cap companies. Among 27 Nifty constituents that announced results, aggregate profit after tax (PAT) grew by 5%, against an estimated 6% growth. For a larger group of 151 companies, PAT grew by 14%.

The earnings growth for the 151 companies was significantly boosted by sectors including oil & gas, technology, cement, capital goods, and metals, which accounted for 86% of the year-on-year (YoY) earnings accretion.

Within the Nifty 50, companies like HDFC Bank, Reliance Industries, Tata Consultancy Services (TCS), JSW Steel, and Infosys were key drivers, contributing 122% to the incremental YoY earnings growth. Conversely, Coal India, Axis Bank, Hindustan Unilever Limited (HUL), and Kotak Mahindra Bank exerted downward pressure on Nifty earnings.

In the broader analysis of 151 companies, large-cap companies reported 13% YoY earnings growth, while mid-cap companies continued their strong trend with 26% YoY growth, exceeding estimates. Small-cap companies, however, showed weakness, reporting only 3% YoY growth against an estimated 4%, with declines seen in private banks, NBFCs, technology, retail, and media sectors.

Impact This divergence in performance between market capitalizations can influence investor strategy, potentially leading to a shift in portfolio allocation towards larger, more stable companies. It also signals which sectors are currently more resilient and profitable, guiding investment decisions and risk assessments. The overall market sentiment could be boosted by the strong performance of key sectors and large entities. Impact Rating: 7/10

Difficult terms: Profit After Tax (PAT): The net profit a company earns after deducting all expenses, including taxes. Year-on-Year (YoY): A comparison of a company's performance or financial metric over a specific period (like a quarter) with the same period in the previous year. Nifty index: A benchmark stock market index representing the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange (NSE). Constituent companies: Companies that are part of a particular index, like the Nifty 50. Market capitalisation: The total market value of a company's outstanding shares of stock. Accretion: An increase or growth in earnings or value. PSU banks: Public Sector Undertaking banks, which are banks where the majority stake is held by the government. NBFC: Non-Banking Financial Company; a financial institution that provides banking-like services but does not hold a banking license.