India Strategy : Interim review 2QFY27: Strong broad-based earnings growth by Motilal Oswal Financial services Ltd
* Corporate earnings have sustained their growth momentum in 2QFY27 so far, building on a meaningful recovery witnessed in 1QFY27 after two years of muted performance. More importantly, the recovery is not merely reflected in aggregate earnings growth but is increasingly broad-based across sectors, despite persistent commodity cost pressure and an uncertain global environment.
* As of 31st Oct’26, 230/35 companies within the MOFSL Universe/Nifty have announced their 2QFY27 results. These companies constituted i) 71% and 66% of the estimated PAT for the MOFSL and Nifty Universe, respectively; ii) 50% of India's market capitalization; and iii) 74% weightage in the Nifty.
* Strong earnings performance amid headwinds: Earnings of the aforesaid 230 MOFSL Universe companies witnessed strong growth, demonstrating a broadbased outperformance across all key aggregates. For the MOFSL Universe, sales/EBITDA/PAT grew 26%/24%/33% YoY (vs. our est. of +19%/+14%/+19%), the highest growth in 12 quarters; excl. OMCs, earnings grew 30% vs. our est. of 22% YoY. This growth was fueled by BFSI, Metals and Oil & Gas. These three sectors contributed 78% to the incremental YoY earnings growth. In contrast, Healthcare and Cement were the only sectors that dragged down the overall aggregates.
* Earnings of the 35 Nifty companies that have declared results so far have grown 22% YoY (vs. our est. of +20% YoY), led by Reliance Industries, JSW Steel, ICICI Bank, Coal India, and Axis Bank. These five companies contributed 59% to the incremental YoY earnings growth. Conversely, Jio Financial, Cipla, Dr Reddy’s Labs, Maruti Suzuki, and Interglobe Aviation dragged Nifty earnings lower.
* Analyzing the caps (ex-OMCs): All categories delivered higher-than-estimated earnings growth. Within our MOFSL Universe, large-caps (66 companies) posted earnings growth of 30% YoY (in line with the overall universe, vs. our est. of +22% YoY). Our mid-cap universe (60 companies) also delivered a healthy performance, with earnings rising 26% YoY (vs. our est. of 23%), driven primarily by Financials, Metals, and Internet & New-Age Tech. Small-caps (101 companies) outperformed with strong earnings growth of 34% YoY (vs. our est. of +28%), supported by a favorable base (4% YoY growth in 2QFY26).
* Beat-miss dynamics: The beat-miss ratio for the MOFSL Universe was favorable, with 43% of the companies exceeding our estimates and 24% reporting a miss at the PAT level. In the large-cap universe, the ratio was similar, with 43% of the companies exceeding our estimates. Among mid-caps and small-caps, 41% and 46% of the coverage universe respectively beat our estimates.
* Nifty EPS sees an upgrade: The Nifty EPS estimate for FY27 was raised by 1.1% to INR1,247, largely owing to Reliance Industries, JSW Steel, HDFC Bank, Bajaj Auto, and Kotak Mahindra Bank. FY28E EPS was also raised by 1.6% to INR1,428 (from INR1,406) due to upgrades in Reliance Industries, HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank.
Key result highlights: Strong performance, anchored by BFSI and Metals
* Earnings of the aforesaid 230 MOFSL Universe companies witnessed strong growth, demonstrating widespread outperformance across all key aggregates. For the MOFSL Universe, sales/EBITDA/PAT grew 26%/24%/33% YoY (vs. our est. of +19%/+14%/+19%), the highest growth in 12 quarters; excl. OMCs, earnings grew 30% vs. our est. of 22% YoY. This growth was fueled by BFSI, Metals, and Oil & Gas. These three sectors contributed 78% to the incremental YoY accretion in earnings. In contrast, Healthcare and Cement were the only sectors that dragged down the overall aggregates.
Large-caps (ex-OMCs) deliver earnings growth in line with the overall universe
* Within our MOFSL Universe, large-caps (66 companies) posted earnings growth of 30% YoY (in line with the overall universe, vs. our est. of +22% YoY).
* Multiple large-cap sectors clocked impressive growth, with 22 of the 24 sectors under our coverage delivering PAT growth.
* Among large-caps, 81% of the companies exceeded/met our estimates
Mid-caps (ex-OMCs) performance driven by Private Banks and Metals
* Our mid-cap universe (60 companies) also delivered a healthy performance, with earnings rising 26% YoY (vs. our est. of 23%), driven primarily by Financials, Metals and Internet & New-Age Tech.
* Within the mid-cap universe, 72% of the companies exceeded/met our estimates.
Small-caps deliver a healthy performance, driven by Private Financials
* Small-caps (101 companies) outperformed with strong earnings growth of 34% YoY (vs. our est. of +28%), supported by a favorable base (4% YoY growth in 2QFY26).
* Multiple small-cap sectors, such as NBFCs, Private Banks, Chemicals, Textiles and Insurance, lifted the overall performance. These sectors contributed ~80% to the incremental YoY accretion in earnings.
* Among small-caps, 74% of the coverage universe exceeded/met our estimates.
MOFSL coverage revisions from our preview stance
* MOFSL Universe PAT sees an upgrade for FY28E: Earnings for the MOFSL Universe saw an upgrade of 1.3% for FY28, led by Financials, Metals, Oil & Gas, and Automobiles. Conversely, sectors that weighed on earnings were Technology, and Internet and New-Age Tech.
* The MOFSL large-cap universe witnessed an upgrade of 1.8% for FY28. In contrast, the mid-cap and small-cap universe saw a marginal cut of 0.7% and 0.3% for FY28, respectively.
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