India's profit growth hits six quarter low;revenue expansion slows

Indian companies, excluding those in banking, financial services, insurance (BFSI), and oil & gas sectors, posted their weakest quarterly performance in several quarters during April–June, with both net profit and revenue growth slowing sharply. Sequentially, earnings and sales fell, reflecting mounting sectoral challenges.
According to information of 1,335 companies,net profit for Q1FY26 grew 8.3% year-on-year — the slowest pace since the December 2023 quarter — while sequential profit dropped 11%, the steepest fall since September 2022. Revenue rose 8.4% year-on-year, the weakest in three quarters, and declined 2.2% from the previous quarter, the sharpest drop since June 2023.Operating profit increased 10% year-on-year, marking its slowest expansion since September 2024, while falling 3.3% sequentially — the largest drop since September 2022.
Sectoral Pressure Mounts
IT services firms continued to grapple with weak discretionary spending, macroeconomic uncertainty, and delayed client decisions, all weighing on growth and margins. Consumer companies reported subdued volume growth, while rising raw material costs further squeezed profitability. Weak urban demand and intensifying competition added to the pressure. The auto sector faced declining demand and narrowing margins.Metal producers saw flat volumes, though better net sales realization supported stable revenues. Favourable pricing and cost control helped operating earnings meet or slightly exceed estimates.
Earnings in Line for Nifty-50
Earnings for Nifty-50 companies were broadly in line with projections. Based on results from 36 companies, net profit for the index rose 8.2% year-on-year. For 25 non-BFSI Nifty-50 companies, EBITDA increased 4.4%, missing estimates by 3.4%.Kotak Institutional Equities projects net profit growth of 10% in FY26 and 17% in FY27. While headline revenue growth appeared resilient, a substantial portion came from non-interest income in banks, one-off investment gains at HDFC Bank, and Reliance Industries’ oil-to-chemicals segment performance.
Mixed Trends Across Market Segments
Motilal Oswal’s report highlighted strong Q1FY26 earnings in several mid-cap sectors — including technology, capital goods, PSU banks, healthcare, cement, metals, and utilities. In contrast, small-cap companies underperformed, with 45% of 74 reviewed firms missing estimates. Weakness was most notable in private banks, NBFCs, automobiles, and oil & gas.Among large-cap and mid-cap companies, 29% and 20%, respectively, reported earnings below expectations. While overall Q1FY26 results were broadly in line, analysts noted continued earnings downgrades. Nifty-50 EPS is projected to grow 10% in FY26, up from just 1% in FY25, aided by supportive fiscal and monetary measures.
Market Outlook
Despite weakness in July, markets have rebounded from April lows. Improving earnings visibility and reasonable valuations — excluding small-caps — are expected to support further gains. Analysts believe the impact of U.S. tariffs on Indian equities will be limited.The Nifty currently trades at 22.1 times FY26 estimated earnings, close to its long-period average of 20.7 times. Model portfolios are maintaining a 70% allocation to large-caps, with an increasingly positive view on mid-caps, the report added.

(Business Correspondent)