Q4 review: BSE 500 companies post 14% profit growth despite energy shock; mid-caps shine with 34.3% surge

Indian companies closed FY26 on a strong note, delivering healthy earnings growth despite geopolitical tensions and volatility in global energy markets, according to a latest report by Emkay Global Financial Services.

The brokerage said profit after tax (PAT) for BSE 500 companies rose 13.9% year-on-year in the March quarter, marking a second consecutive quarter of double-digit earnings growth. The performance was supported by stronger revenue growth, broad-based sectoral participation and continued strength in corporate balance sheets.

Revenue growth for non-financial companies accelerated to 12.3% in the fourth quarter from 9.2% in the previous quarter. While EBITDA margins eased slightly to 16.4%, earnings quality remained healthy, reflecting resilient business fundamentals, Emkay said.

Key takeaways from Q4 performance

Emkay's analysis shows that earnings growth in Q4FY26 remained broad-based across market-cap segments, with mid-cap companies emerging as the standout performers. Adjusted PAT for mid-caps grew 34.3% year-on-year in the March quarter, significantly outpacing the 10.3% growth recorded by both large-cap and small-cap companies.

One of the key highlights of the earnings season was the breadth of the recovery. Nearly 59% of BSE 500 companies reported profit growth of more than 10%, while 39% posted earnings growth exceeding 25%. Companies also outperformed market expectations, with 48% of Nifty constituents reporting positive earnings surprises, up from 32% in the previous quarter.

The growth was not confined to a handful of sectors. Consumer discretionary companies were among the strongest performers, reporting nearly 18% profit growth as demand conditions improved. Consumer staples firms posted earnings growth of more than 15%, while IT companies delivered 13.4% growth despite an uncertain global environment. Financial companies remained key contributors, with profits rising 13.1%.

Energy and materials companies stood out during the quarter, registering earnings growth of 23.8% and 23.1%, respectively. However, Emkay noted that part of the gains in the energy sector was driven by inventory-related benefits, which could moderate in the coming quarters. Industrials remained the only major weak spot, with profits declining 8.9% due to losses at a few large companies.

Beyond earnings, corporate cash flows remained robust. Operating cash flow-to-EBITDA stood at 82.4% in FY26, while free cash flow-to-PAT was 61%. Operating cash flows and free cash flows rose 13% and 15%, respectively, during the year, reflecting strong cash generation and disciplined capital management.

"The Q4FY26 earnings season reinforces the strength and resilience of Corporate India," said Seshadri Sen, Head of Research and Strategist at Emkay Global. "What is particularly encouraging is the broad-based nature of this recovery, with multiple sectors and market segments contributing to growth."

The brokerage, however, flagged a slowdown in corporate capital expenditure as an area to watch. Capex growth moderated to 9% in FY26 from 18% in FY25, with the slowdown most visible in the energy and utilities sectors.

FY27 outlook remains strong

Emkay remains optimistic about FY27. Consensus estimates suggest Nifty earnings per share could rise to ₹1,234 in FY27, implying growth of 13.8% and marking the first year of double-digit earnings growth for the benchmark index in three years.

According to the report, improving consumption trends, resilient corporate balance sheets, healthy cash flows and broad-based earnings growth provide a solid foundation for Indian equities in FY27. The biggest risk, it said, remains any prolonged disruption to global energy supply chains stemming from tensions in the Middle East.

For now, the earnings season suggests Corporate India is entering FY27 from a position of strength, with growth becoming increasingly broad-based and fundamentals remaining firmly intact.