Indian companies are showing early signs of a rebound as they begin fiscal year 2026 (FY26) on a profitable note, with a noticeable shift from losses to profits for many firms. While overall demand remains subdued, this positive trend offers a glimmer of hope that a broader recovery may be on the horizon.

Early Trends in Q1 FY26 Earnings

The June 2025 quarter earnings season for Nifty 50 companies has largely met expectations, reflecting broader economic and sectoral trends. Of the 50 Nifty constituents, 36 have already reported their results, covering sectors such as BFSI, IT, oil & gas, FMCG, capital goods, pharma, and insurance. Despite mixed outcomes, brokerages suggest that the current earnings cycle is stabilizing after a period of downgrades and volatility.

However, early earnings trends for the June quarter revealed a slowdown in revenue and profit growth, hitting a nine-quarter low, excluding a one-time gain by Reliance Industries (RIL). Banking, finance, FMCG, and IT sectors experienced muted performance, impacting overall growth. Net profit rose 18.5% year-on-year, the highest in five quarters, but this was mainly due to a one-time gain by RIL. Excluding RIL's figures, revenue and profit growth showed 5.7% and 7.3% increases, respectively, marking nine-quarter lows for both metrics.

Sectoral Performance

The earnings growth in the first quarter of FY26 was primarily driven by key sectors such as BFSI (4% YoY), Technology (7%), Oil & Gas (7%), Cement (47%), and Utilities (13%). These five sectors accounted for approximately 71% of the total incremental YoY growth in Nifty earnings. The cement sector experienced the most significant surge in profits, supported by price hikes and operating leverage, while the oil & gas sector benefited from stable crude prices.

Some sectors, including healthcare and telecom, are expected to show some optimism, but most are unlikely to deliver positive surprises in Q1FY26. The banking and finance sector displayed weak performance due to compressed net interest margins and reduced credit uptake. IT sector companies recorded their lowest five-quarter performance, with revenue growth at 3.4% and profit growth at 4.6%.

Company Highlights

Several companies have reported strong Q1 FY26 results. Realty major DLF reported an 18% increase in consolidated net profit, driven by record-high new sales bookings and strong operational performance. Inox India posted strong Q1 FY26 results with PAT up 18.9% YoY and revenue rising 16.7%.

Analyst Perspectives

Analysts anticipate a lukewarm net profit for India's Nifty 50 companies, potentially not exceeding 4.5% without considering oil companies in the first quarter of the current fiscal year. Kotak Institutional Equities analysts expect a 10.6% year-over-year increase in net income for the KIE universe, largely driven by a strong rebound in the profits of oil marketing companies (OMCs). Excluding OMCs, net income will see a more modest increase of 4.5% year-over-year. Equiris Securities analysts were more conservative, forecasting 3% net profit growth for the companies they cover.

Motilal Oswal Financial Services (MOFS) reported that earnings for 38 Nifty firms grew 7.5% YoY, exceeding their estimate of 5.7%. Nifty50 earnings are projected to rise to approximately 10% in FY26, compared to an anaemic 1% in FY25, aided by an anticipated improvement in the macro environment due to stimulative fiscal and monetary measures.

Challenges and Outlook

Despite the positive signs, challenges remain. Jefferies flagged that the bulk of earnings cuts were concentrated in the banking sector, particularly among larger private lenders, due to concerns over asset quality and net interest margin (NIM) compression. Shrikanth Chouhan, Head of Research at Kotak Securities, noted that banks may find it difficult to show decent numbers due to their inability to reduce rates on savings, which could lead to margin compression.

Overall, while the initial FY26 results indicate a move towards profitability for Indian companies, the growth momentum has slowed. Performance is varied across sectors, with some industries showing strong gains while others struggle.