Indian Corporate Earnings Post Strongest Quarter in Ten Quarters, Yet Markets Extend Losing Streak

India’s corporate earnings posted their best quarter in two-and-a-half years, according to the latest India Strategy report by Motilal Oswal Financial Services Ltd. Despite the positive results, the stock market remained in the red, with benchmark indices extending their losing streak to a fifth straight session.

The Nifty 50 settled at 24,287.65, down 78.35 points or 0.32 per cent, while the Sensex slipped 0.36 per cent to close at 77,728.16. The index touched an intraday low of 24,226.95 before recovering partially in afternoon trade. Notably, Nifty closed below its 20-day simple moving average for the first time in a while, which analysts flagged as a negative technical signal.

Broader markets held up better. The Nifty Midcap 100 ended nearly flat, while the Nifty Smallcap 100 advanced 0.36 per cent, reflecting selective buying interest away from large-cap heavyweights.

Against this cautious backdrop, the Q1FY27 earnings scorecard offered a bright spot. Nifty 50 companies reported an 18 per cent year-on-year growth in profit after tax (PAT), the highest in 10 quarters and well ahead of Motilal Oswal’s 10 per cent estimate. ONGC, Hindalco, Reliance Industries, JSW Steel, and Bharti Airtel collectively accounted for 60 per cent of the earnings increase. Mid-cap and small-cap companies also impressed, with PAT rising 23 per cent and 31 per cent respectively. The FY27 Nifty EPS estimate was nudged up 0.6 per cent to ₹1,232.

According to the Motilal Oswal report, 130 companies within their coverage universe reported an upgrade of more than 3 per cent, while 89 reported a downgrade, leading to a favorable upgrade-to-downgrade ratio for FY27. The FY28E EPS was also raised by 0.3 per cent to ₹1,425 due to upgrades in institutions like SBI, ICICI Bank, Hindalco, Bajaj Finserv, and Bajaj Auto.

Investor sentiment remained subdued as Brent crude moved towards the $90 per barrel mark amid continued uncertainty surrounding the US-Iran conflict and concerns over potential disruptions to global energy supplies. Brent crude rose 1.2 per cent to above $89 per barrel, acting as a key overhang for markets and oil marketing companies. Additionally, the rupee weakened by around 14 paise to 95.59 against the dollar, pressured by subdued foreign institutional flows and the RBI advancing the cut-off date for its concessional FCNR(B) swap facility to August 31.

The sectoral story was sharply divided. Nifty Realty gained 1.46 per cent and Nifty Metal climbed 1.26 per cent, with Hindalco and Tata Steel among the top index gainers. On the other end, IT shed 1.75 per cent and FMCG fell 1.05 per cent, with HCL Technologies and Infosys leading the declines. Voltas was a notable casualty despite reporting a 51 per cent year-on-year jump in Q1 PAT to ₹213 crore.

Looking ahead, markets are likely to remain range-bound with focus shifting to global cues, including the US Fed’s July FOMC minutes and the trajectory of crude prices. Domestically, primary market activity remains active with upcoming IPOs including Horizon Industrial Parks, Lalithaa Jewellery Mart, and Molbio Diagnostics.

"The divergence between stellar corporate earnings and sluggish market performance highlights the reality that macroeconomic variables often outweigh micro-level fundamentals in the short term. While an 18 percent growth in profit after tax across Nifty 50 companies demonstrates strong underlying business resilience, external pressures like rising crude prices, currency fluctuations, and global geopolitical uncertainties continue to dictate investor sentiment. For entrepreneurs and business leaders, this underscores the importance of maintaining robust operational efficiency while navigating a volatile macroeconomic environment." — Dr. Shishir Gupta, Founder & CEO, StartupLanes