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1QFY26 Nifty-500 review: Earnings growth gathers pace

Growth led by OMCs and NBFCs; midcaps continue to outperform

* Nifty-500 companies delivered a healthy performance in 1QFY26 despite signifi4cant geopolitical headwinds and weak consumption trends, improving from a muted quarterly performance during FY25.

* Aggregate sales/EBITDA/adj. PAT of Nifty-500 companies grew 5%/11%/10% YoY to INR34.7t/INR7.6t/INR4.0t in 1QFY26.

* 1Q earnings were primarily driven by broad-based growth, with significant contributions from key sectors such as O&G (+32% YoY), Metals (+9% YoY), NBFCs (+16% YoY), Capital Goods (+15%), Cement (+46% YoY), Telecom (loss to profit), Retail (+24% YoY), and Real Estate (+16% YoY).

* Chemicals (+27% YoY) and Media (+17% YoY) recorded strong growth on a weak base. Meanwhile, PSBs (+5% YoY), Consumer (+4% YoY), Healthcare (+6% YoY), Technology (+7% YoY) and Consumer Durable (+10% YoY) witnessed muted earnings growth. In contrast, Pvt. Banks (-1% YoY), Automobile (-1% YoY) and Infra (-4% YoY) dragged down overall earnings growth.

* Excl. BFSI, Nifty-500 reported aggregate earnings growth of 12% YoY. Excl. Metals and O&G, aggregate earnings growth was 7% YoY.

* EBITDA margin of Nifty-500 (excl. BFSI) came in at 17.1% (up 70bp YoY/40bp QoQ). Excl. commodities (i.e., Metals and O&G), EBITDA margin stood at 19.5% (down 30bp YoY/10bp QoQ). Ten sectors (excl. Financials) reported EBITDA margin expansion during the quarter.

* Midcaps continued to outperform:The 1Q earnings performance of Nifty-500 was led by midcap companies. Aggregate earnings of the Nifty Midcap-150 grew 17% YoY, outperforming largecaps and smallcaps for the fourth consecutive quarter. In comparison, earnings growth for the Nifty-100 and Nifty Smallcap250 stood at 8% and 6% YoY, respectively.

* Sectors and companies: Of the 21 key sectors, 16 reported profit growth in 1Q. Heavyweights dominated during the quarter, with the top 10 companies, primarily from O&G, Metals, and Financials, contributing around 71% to the incremental YoY earnings growth. About 212 Nifty-500 companies reported earnings growth of over 15% YoY, while 183 companies reported a decline/loss during the quarter.

Key sectoral highlights for 1QFY26

* Oil and Gas: The sector contributed significantly during the quarter, with EBITDA/PAT growth of 18%/32% YoY, mainly led by OMCs (+151% YoY PAT growth). Excl. OMCs, EBITDA/PAT declined 16%/32% YoY.

* Metals: The sector contributed positively to the quarter’s earnings, with PAT growth of 9% YoY over a soft base of 1QFY25. Growth was also boosted by a strong performance of Ferrous companies, driven by a healthy operating performance, healthy NSR and muted costs.

* Within BFSI (reported 7% YoY earnings growth), the banking sector posted a muted 1Q performance (PAT growth 2% YoY), with business momentum moderating. NIMs contracted for both private and public banks, with private lenders seeing a sharper decline due to higher exposure to repo-linked loans and interest reversals from elevated slippages. Public banks also witnessed margin compression, driven by their quicker loan repricing cycle. Contrarily, NBFCs posted healthy earnings growth of 16% YoY, driving the overall earnings growth in 1Q.

* Telecom sector reported a profit of INR12b in 1QFY26 compared to a loss of INR5b in 1QFY25, primarily driven by Bharti Airtel. However, other peers posted muted growth or a decline in earnings for the quarter.

* Cement sector reported its first quarter of strong earnings growth after four consecutive quarters of declines, with earnings rising 46% YoY in 1QFY26. Reported sales and EBITDA grew 14% and 39% YoY, respectively.

* Capital Goods companies reported a healthy quarter, with sales/EBITDA/PAT growth of 15%/16%/15% YoY, led by healthy order momentum and execution.

* Healthcare sector reported a muted quarter with only 6% YoY earnings growth. While sales growth was stable for the domestic formulation (DF) segment, US sales performance was muted, dragging down the overall quarterly performance at the aggregate level. Hospital companies within Nifty-500 reported robust earnings growth of 30% YoY

* Technology: IT services companies reported a challenging quarter, with PAT growth of 7% YoY. Tier-1 companies remained weak due to lower-than-expected growth and subdued demand. The backdrop remains challenging, as GenAI-led productivity gains, weak macros, and client caution weighed on performance.

* Automobile sector reported a weak quarter, with aggregate earnings down 1% YoY. While M&M, Hero MotoCorp and Bajaj Auto led the earnings, TTMT dragged down the quarter’s earnings. Excl. TTMT, the sector’s sales/EBITDA/PAT (excl. TTMT) grew 9%/2%/8% YoY.

* Consumer sector reported a sequentially stable quarter, with volume growth across most companies limited to low- to mid-single digits. Rural demand continues to outpace urban demand, though encouraging trends are also emerging in urban markets. Nifty-500 companies reported sales/EBITDA/PAT growth of 9%/2%/4% YoY in 1QFY26.

* Utilities sector reported a muted quarter with nearly flat earnings (+1% YoY), led by NTPC but dragged down by Adani Power. Sales/EBITDA were flat/down 3% YoY for the sector during the quarter.

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