Nifty profit growth hits 10-quarter high, but five companies do the heavy lifting

India Inc’s June-quarter earnings delivered a stronger-than-expected performance, with profit growth across Nifty 50 companies reaching its highest level in 10 quarters. However, a closer look at the numbers shows that an important part of the earnings acceleration was concentrated in five companies, even as the broader corporate universe recorded a widespread improvement.

According to Motilal Oswal Financial Services’ India Strategy: Review 1QFY27, Nifty companies reported 18% year-on-year growth in profit after tax (PAT) in Q1FY27, compared with the brokerage’s estimate of 10%. The report described the earnings season as a “broad-based beat”, with 19 sectors outperforming expectations.

Yet, ONGC, Hindalco Industries, Reliance Industries, JSW Steel and Bharti Airtel together accounted for 60% of the incremental year-on-year earnings accretion for the Nifty, highlighting the concentration behind the headline profit growth.

Earnings beat was broader than the Nifty headline suggests

The strength was not confined to the benchmark index. For the Motilal Oswal universe excluding oil marketing companies (OMCs), sales, EBITDA and PAT grew 18%, 15% and 22% YoY, respectively, against estimates of 15%, 10% and 15%.

The brokerage said the performance was led by BFSI, metals, oil and gas excluding OMCs, technology and telecom. OMCs emerged as the biggest drag, swinging to a loss of ₹18,100 crore from a profit of ₹16,200 crore a year earlier. Cement and InterGlobe Aviation were other major weak spots.

The breadth of the earnings beat was also evident across market capitalisation categories. Large caps posted 21% PAT growth, while mid-caps recorded 23% growth, their strongest performance in 11 quarters. Small caps were the biggest outperformers, with PAT rising 31%, against the brokerage’s estimate of 22%.

Motilal Oswal noted that the small-cap performance was supported by a favourable base, with earnings having risen just 1% in Q1FY26.

Metals emerge as a major earnings engine

The sectoral composition of incremental earnings also points to a major shift.

Oil and gas excluding OMCs contributed ₹16,900 crore to incremental PAT, followed by metals at ₹15,700 crore, NBFC lending at ₹8,000 crore, private banks at ₹7,300 crore and PSU banks at ₹3,900 crore. The top five sectors together accounted for 73% of the PAT delta in Q1FY27.

Metals, in particular, have staged a sharp turnaround. Motilal Oswal said the sector, which had been among the bottom 10 contributors a year earlier, had now emerged as one of the biggest contributors to earnings growth.

The sector delivered 57% PAT growth in Q1FY27, while oil and gas excluding OMCs recorded a 54% increase. Financials were another major pillar, with aggregate financial-sector PAT growing 19%. NBFC lending and non-lending businesses posted 31% and 28% profit growth, respectively.

26 of 28 sectors posted profit growth

The earnings improvement was remarkably widespread. Motilal Oswal’s aggregate universe recorded 20% sales growth, 6% EBITDA growth and 11% PAT growth in Q1FY27. Excluding OMCs, PAT growth accelerated to 22%.

The brokerage also stated that 26 of 28 major sectors experienced year-on-year profit growth.

Among the strongest performers were telecom, metals, chemicals, NBFC lending, retail, NBFC non-lending, consumer durables and real estate. Chemicals posted 35% PAT growth, retail 30%, real estate 25% and consumer durables 25%.

However, the headline profit growth came alongside margin pressure. EBITDA margin excluding financials contracted 220 basis points YoY to 15.3%, with OMCs playing a significant role in the decline.

Earnings outlook improves, but upgrades remain modest

The broad earnings beat has prompted Motilal Oswal to raise its earnings expectations, although the revisions at the index level remain relatively restrained.

The brokerage raised its FY27 Nifty EPS estimate by 0.6% to ₹1,232, while FY28 EPS was increased 0.3% to ₹1,425. The FY27 upgrades were driven primarily by Reliance Industries, Hindalco, ONGC, ICICI Bank and SBI.

Across its broader coverage universe, Motilal Oswal recorded 130 earnings upgrades against 89 downgrades, taking the upgrade-to-downgrade ratio to 1.5x. The report called this a favourable trend and said it represented the strongest ratio in 22 quarters.

The brokerage’s overall conclusion is therefore more nuanced than simply declaring a strong quarter. Q1FY27 delivered an unusually broad earnings beat, with strong contributions from financials, metals and O&G. But the concentration of incremental Nifty profits in five companies, along with continued margin pressure, suggests that the quality and sustainability of the earnings recovery will remain key variables for the market going forward.