Q3 roundup: India earnings stabilise; brokerages expect stronger 2026 for equities

FILE PHOTO: India’s Finance Minister Nirmala Sitharaman is displayed on a screen outside the Bombay Stock Exchange (BSE) in Mumbai, India, February 1, 2026. REUTERS/Francis Mascarenhas/File Photo · Reuters

By Bharath Rajeswaran

Tue, 17 February 2026 at 3:53 pm GMT+9 2 min read

By Bharath Rajeswaran

Feb 17 (Reuters) - Indian equities may be nearing a turning point in earnings growth and market performance as profits stabilise, valuations ease and trade talks with the United ‌States and European Union advance, four brokerages said after the country’s largest listed companies reported ‌December-quarter results.

India’s benchmark Nifty 50 and BSE Sensex have risen about 9% and 7% since the start of 2025, lagging Asian and ​broader emerging-market peers amid muted earnings momentum, elevated valuations, global trade uncertainty, record foreign outflows and weakness in IT stocks.

However, for the third quarter ended Dec. 31, Nifty 50 companies posted a 7.5% year-on-year profit growth, up from 1.9% in the previous quarter.

Growth was broader across the market, with BSE 500 companies reporting 16% profit expansion, ‌led by energy and consumer discretionary ⁠companies. Information technology stocks lagged.

Even so, Nifty profit-after-tax growth stayed in single digits for a seventh straight quarter. Analysts led by Seshadri Sen at Emkay Global said headline ⁠earnings growth would have been closer to 14% after adjusting for the labour-code impact.

The new codes mandate basic salaries account for at least 50% of cost-to-company, increasing gratuity liabilities. Emkay estimated a roughly 5% hit to aggregate December-quarter ​profit after ​tax.

Brokerages flagged early signs of a recovery in consumption ​and said an interim framework for an India-U.S. ‌deal could mark a turning point for markets.

Valuations have moderated after underperformance, while supportive fiscal and monetary policy, signs of consumption revival and progress in trade talks with the European Union and the U.S. have improved the forward earnings outlook, analysts said.

“Strong festive and rural demand, a stable interest-rate environment, a pickup in credit growth and lower input costs drove a broad-based earnings recovery,” said J.P. Morgan analysts Rajiv Batra and ‌Rushi Mehta, adding that mid-caps and small-caps posted earnings growth ​of 12% and 21%, respectively, in the third quarter.

Motilal Oswal said ​five Nifty 50 stocks, State Bank of ​India, Tata Steel, HDFC Bank, Tata Consultancy Services and Bharti Airtel, accounted for 78% ‌of incremental earnings growth.

Against stabilising profits, the brokerage ​said markets were better positioned ​for improved performance in 2026, with the U.S. and EU trade deals seen as key catalysts.

J.P. Morgan and Motilal Oswal cautioned that AI-led disruption in IT services and spillover risks to other ​sectors remained a key overhang, heightening ‌job-security concerns in urban areas.

Story Continues  

India’s IT index has fallen about 12% so far in 2026 ​after dropping 12.6% in 2025, while the Nifty 50 is down 1.8% year to date.

(Reporting ​by Bharath Rajeswaran in Bengaluru; Editing by Nivedita Bhattacharjee)

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