Overall earnings momentum in Q3FY26 is expected to be driven by the oil and gas sector, where earnings are estimated to grow 25% year-on-year, and financial services, led by NBFC loan companies with 26% growth.Automobiles are expected to deliver a 25% year-on-year profit increase, while metals will grow 15%. Telecom profits are expected to rise 2.6 times from low levels in Q3 25, while tech sector profits are likely to rise 8%.
Other major contributors include real estate, where profits are expected to rise 64% year-on-year, capital goods 24%, cement 66% and NBFC non-lending businesses 31%. Collectively, these sectors are expected to account for nearly 77% of incremental annualized earnings growth during the quarter.
In contrast, banks’ profit contribution is expected to remain modest, with private banks seeing their profits grow by 4% year-on-year and public sector banks by 3%. The infrastructure and media sectors are likely to negatively impact overall profits, with profits estimated to decline by 3% and 7% year-on-year respectively.
Outlook for the financial year 26
Looking ahead, MOFSL expects FY26 earnings for Nifty companies to grow 8% YoY, and excluding financial services, FY26 earnings are expected to grow 7% YoY. Further, excluding metals and O&G, FY26 earnings growth for the Nifty 50 is estimated at 8% YoY.
Turning to the broader MOFSL universe, full-year earnings are expected to grow 14% year-on-year. Excluding the financials, FY26 earnings are expected to rise 17% year-on-year, the note said. Excluding metals and O&G, the broader universe is expected to grow 12% year-on-year.
However, MOFSL has cut its Nifty EPS estimates for FY26 and FY27 by 2.2% and 1.1% respectively and now expects it to grow 9% YoY in FY26 to Rs 1,084, followed by 15% growth in FY27 to Rs 1,267.
The downgrade is largely due to weaker expectations from the metals, oil and gas, financial and consumer sectors, the note said.
MOFSL’s Top 5 Nifty 50 Ideas
The brokerage’s top Nifty ideas include PSU lender State Bank of India (SBI), Titan Company, Mahindra & Mahindra (M&M), Infosys and Eternal.
Top 5 Unhelpful Ideas
Dixon Technologies, Indian Hotels, Billionbrains Garage Ventures (Groww), TVS Motors and Radico Khaitan.
Sectoral assessments
MOFSL remains ‘overweight’ in Autos, Diversified Financials, Industrials and EMS, Consumer Discretionary and Technology. It remains ‘underweight’ in oil and gas, metals and consumer staples.
Market outlook for 2026
The brokerage noted multiple levers to boost Indian equity markets in 2026. “In CY25, India faced a steady stream of disproportionate and punitive US trade measures, which played a major role in catalyzing USD 19 billion FII outflows. However, the government and RBI have been active in mitigating external headwinds and have taken several fiscal, monetary and reform stimulus measures to unleash domestic growth impulses,” the note said.
In his view, these measures should now come into full force in 2026, and MOFSL sees limited domestic risk factors working against this.
Despite these challenges, the Nifty posted early double-digit gains in CY25, rising 11%, while the broader Nifty 500 grew 7%, although significantly lagging global indices. The MSCI EM index rose 31%, while the MSCI AXJ rose 30% over the same period.
However, geopolitics and global trade remain major caveats and could cast a shadow of chronic risk aversion on equity markets, the note warned.
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(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times.)
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