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Earnings - Large-Caps In-Line; Mid & Small Caps Continue to Outperform

ICICIdirect Research 29 May 2026 DISCLAIMER

At the Nifty level, 48 companies have released their results till date.
Q4FY26’s performance was largely in line with street expectations
Topline grew ~12% YoY, while adjusted PAT growth stood at a relatively modest ~5% YoY.
Within the index, financials marginally outperformed, reporting ~7% YoY growth in adjusted PAT, compared to ~5% YoY growth for non-financials.
For non-financials:

Operating margins declined ~60 bps QoQ to ~18%, driven by increase in raw material costs (~90 bps QoQ impact)

Broad-Based Strength Beyond Large Caps

  • Broader markets continued to outperform meaningfully:
    • Midcaps: ~28% YoY earnings growth
    • Small caps: ~24% YoY earnings growth
  • At an aggregate level:
    • All listed companies reported ~16% YoY PAT growth in Q4FY26
    • Ex-Nifty 50, earnings growth was even stronger at ~26% YoY, highlighting the breadth of the earnings recovery
  • Importantly, this marks the third consecutive quarter of double-digit earnings growth:
    • Q2FY26: ~12% YoY
    • Q3FY26: ~18% YoY
    • Q4FY26: ~16% YoY (till date)

 In Q4FY26, sectoral earnings were led by Metals, IT, and FMCG, while Pharma and Power emerged as relative underperformers.

  • Metals outperformance was driven by improving realizations, benign input cost environment, and better operating leverage.
  • IT earnings were supported by stable deal wins, margin resilience, and cost optimization efforts, despite muted global demand environment. Sector also benefited from INR depreciation
  • FMCG growth was aided by gradual rural demand recovery and price hikes taken in earlier quarters flowing through margins.

Outlook

  • Near-term earnings (Q1–Q2 FY27) may see some moderation, primarily due to the lagged impact of elevated crude oil prices on margins and inflation.
  • However, on a full-year basis, the impact appears manageable:
    • Our forward estimates for Nifty EPS in FY27E and FY28E indicate only a low single-digit downward adjustment (<=3%)
    • This suggests that crude-related pressures are likely transient rather than structural
  • We continue to see no material risk to double-digit earnings growth trajectory, with:
    • Nifty 50 earnings expected to grow ~13–15% CAGR over FY26–FY28E
  • Overall, the earnings cycle remains healthy, with temporary margin pressures unlikely to derail the broader growth trajectory.

 

 

 

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