Indian equities poised for better CY26; Smart earnings growth of 12% CAGR in FY25-27: Motilal Oswal

According to Motilal Oswal, Indian markets appear poised for better performance in CY26, especially after the sharp underperformance of around 26% in USD versus MSCI EM in CY25. The brokerage believes that the earnings environment is stabilizing and macro conditions are turning supportive following a series of monetary and fiscal measures by the RBI and the Indian government.Motilal Oswal said its Q3 2026 earnings season was largely in line with expectations. In the MOFSL universe, 34% of companies exceeded estimates, while 32% reported a miss at the PAT level, keeping the beat-miss ratio in balance. Importantly, the trajectory of overall earnings revisions has improved. After a slowing pace of earnings declines through Q1FY26, overall MOFSL PAT moved into upgrade territory in Q2FY26, a trend further confirmed in Q3FY26.

The MOFSL universe achieved 16% year-on-year PAT growth in Q3’26, slightly higher than the 14% estimate. Motilal Oswal expects Nifty earnings growth of around 12% in FY25-27E. Smart valuations of around 20.4x forward 12-month earnings are marginally below the long-term average of 20.9x, although broader market valuations remain under pressure.

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The Nifty reported 7% YoY PAT growth in the quarter, slightly ahead of the 6% estimate, marking the seventh consecutive quarter of single-digit earnings growth since June 2020. SBI, Tata Steel, HDFC Bank, TCS and Bharti Airtel contributed 78% to the incremental YoY earnings growth, while Tata Motors PV, Cipla, ICICI Bank and Interglobe Aviation depressed index profits. Within the Nifty, 14 companies beat estimates, 10 missed and 26 were in line.

Across all market cap segments, large caps delivered 16% annualized earnings growth, in line with the overall universe. Midcaps grew 15% year-on-year, below the 22% estimate, led by private banks, metals, logistics and insurance. In contrast, healthcare, credit and non-lending NBFCs, automotive, oil and gas and utilities showed strong growth and accounted for about 77% of the incremental year-on-year earnings growth. Small caps posted 29% year-on-year earnings growth, versus an estimate of 34%, with 62% of companies meeting or exceeding expectations. In comparison, 79% of large caps and 67% of midcaps met or exceeded expectations.

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