Stocks To Watch: Motilal Oswal Financial Services (MOFSL) has released its India Strategy, 2QFY26 Review, highlighting that India’s corporate earnings season was largely in line with expectations, supported by strong performances in Oil & Gas, Cement, Metals, and select financial and auto sectors.
The report offers a detailed sectoral breakdown, providing valuable insights for investors navigating the evolving market landscape.
Strong Q2 Earnings Momentum
According to MOFSL, aggregate earnings for its coverage universe rose 14 per cent year-on-year, outpacing its initial estimate of 9 per cent.
The performance was anchored by a sharp rebound in Oil & Gas, which grew 79 per cent YoY, led by oil marketing companies (OMCs) posting ninefold profit growth.
Other outperformers included Technology (8 per cent YoY), Cement (147 per cent YoY), Capital Goods (17 per cent YoY), and Metals (7 per cent YoY).
These five sectors together accounted for 86 per cent of the total incremental earnings growth during the quarter.
The report noted that, excluding global commodity-linked sectors, earnings still rose a robust 6 per cent YoY, while excluding financials, profit growth was an impressive 25 per cent YoY, signalling strong underlying domestic demand.
Mid-Caps vs Large-Caps vs Small-Caps Stocks
Mid-cap companies continued to outperform, delivering 26 per cent YoY earnings growth, significantly higher than large-caps at 13 per cent.
MOFSL highlighted that sectors such as Technology, Cement, PSU Banks, Metals, Real Estate, and NBFCs (Non-Lending) showed the most resilience within mid-caps.
Meanwhile, small-caps posted muted earnings growth of 3 per cent YoY, as sectors like private banks, NBFCs, retail, and media faced pressure.
The brokerage upgraded its FY26 earnings estimates by 1.2 per cent, driven primarily by Oil & Gas, Cement, PSU Banks, Healthcare, and Automobiles, with mid-caps witnessing the steepest upward revisions.
Market Outlook and Valuation View
MOFSL emphasised that the earnings downgrade cycle has moderated, signalling a bottoming out of profit pressures.
The firm believes Indian equities are entering a healthier phase, supported by improving macros and domestic reforms.
The brokerage expects earnings growth to accelerate into double digits, which could drive valuation re-rating.
At current levels, the Nifty trades at 21.4x, close to its long-period average (LPA) of 20.8x, suggesting reasonable valuations. MOFSL expects further upside as growth visibility improves and policy reforms continue.
