Companies in the Nifty-500 index have shown their best earnings growth in two years. This surge is largely driven by gains in smaller companies, while certain larger sectors also contributed to the overall strong performance. Despite headwinds from global events and slower consumer spending, the broader market has delivered robust financial results in the latest reporting period.
Context
The Nifty-500 index, representing a broad spectrum of Indian listed companies, has reported its highest earnings growth in eight quarters. This development comes as a significant indicator of the financial health of a wide range of businesses. The period under review, 2QFY26 (the second quarter of the financial year 2026), saw a notable uplift in profits across various market capitalizations.
Key Performance Drivers: The performance was significantly bolstered by the small-cap segment, which posted a 37% earnings increase. This strong showing from smaller firms contributed substantially to the overall positive trend observed in the Nifty-500.
Sectoral Contributions: Several cyclical sectors have re-emerged as significant contributors to earnings. These include Oil & Gas, metals, cement, and capital goods. Their outsized contributions were a key feature of the reporting period.
Broader Market Strength: The Nifty Midcap-150 companies experienced a 20% year-on-year earnings growth, and the Smallcap-250 index saw a 26% rise, albeit on a comparatively softer base from the previous year.
Large-Cap Performance: While the broader market surged, some large-cap sectors had a mixed impact. Autos and private banks exerted a downward pull on overall large-cap performance, contrasting with the gains seen in other areas.
Financial Sector: Even when excluding financial stocks, the earnings growth remained substantial at 23%. Within the financial sector, public sector banks reported an 18% growth, and NBFC lending companies showed a 19% profit rise.
Evidence
Multiple sources confirm the strong earnings performance of the Nifty-500.
A report from Motilal Oswal Financial Services highlighted that the Nifty-500 delivered its strongest earnings performance in five quarters, despite ongoing geopolitical tensions and weak consumption affecting market sentiment.
The Oil & Gas sector alone recorded a significant 38% jump in profits.
The metals sector also saw a robust 34% growth in earnings, benefiting from a softer comparative base from the previous year.
Excluding financials, the overall earnings growth for the Nifty-500 was a substantial 23%.
Sectoral Contributions and Performance Trends
The latest earnings season indicates a shift in which sectors are driving growth. The strength observed in the Nifty-500 is a result of combined efforts from various segments of the market.
Cyclical Sectors Lead the Charge
Sectors such as Oil & Gas, metals, cement, and capital goods have delivered outsized earnings contributions this quarter. This resurgence suggests a positive economic cycle impacting these foundational industries.
The Oil & Gas sector reported a 38% profit increase, while metals saw a 34% growth, indicating strong demand or favorable pricing.
Financials Show Steady Growth
The financial services sector, a key component of the Indian market, also contributed positively.
Public sector banks posted an 18% earnings growth, and NBFC lending companies reported a 19% rise in profits. These figures demonstrate resilience within the financial system.
Even with these gains, the broader Nifty-500 showed even higher growth when financials were excluded, suggesting broad-based economic activity beyond just finance.
Small and Mid-Cap Segments Outperform
The small-cap segment was a significant driver, with a 37% increase in earnings. This points to strong performance from smaller, often more agile companies.
The Nifty Midcap-150 companies grew their earnings by 20% year-on-year.
The Smallcap-250 companies achieved a 26% growth, though this was on a softer base compared to the previous year.
Market Cap Comparisons
The earnings growth across different market capitalizations provides a clearer picture of where the economic momentum lies.
| Index | Earnings Growth | Notes |
|---|---|---|
| Nifty-500 | Highest in 8 quarters | Broad market performance |
| Nifty-100 | 18% | Large-cap performance |
| Nifty Midcap-150 | 20% | Mid-cap performance |
| Smallcap-250 | 26% | Small-cap performance (softer base) |
| Excluding Financials | 23% | Broader market strength beyond finance |
Expert Analysis
Reports from financial analysis firms indicate that the recent earnings season for the Nifty-500 has been particularly strong. Motilal Oswal Financial Services noted this as the strongest quarter in five quarters for the broader market. The data suggests that despite challenges such as geopolitical tensions and weak consumption, companies have managed to improve their financial performance. The broad-based nature of the growth, especially the significant contribution from the small-cap segment and cyclical sectors, points towards a potential economic upswing or a successful adaptation by businesses to prevailing conditions.
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Conclusion
The Nifty-500 index has demonstrated its strongest earnings growth in eight quarters during 2QFY26. This performance was notably propelled by a substantial 37% earnings increase in the small-cap segment, alongside strong contributions from cyclical sectors like Oil & Gas (38% profit jump) and metals (34% growth). Even when financial stocks were excluded, overall earnings growth remained robust at 23%, indicating widespread economic activity. Mid-cap and other small-cap indices also posted significant gains. While some large-cap sectors like autos and private banks may have tempered overall large-cap performance, the broader market's financial results signal a period of considerable recovery and strength, outperforming expectations amidst global economic uncertainties.
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Sources Used:
Business Standard: Reports on the Nifty-500 earnings growth, highlighting the role of small caps and cyclical sectors, and citing analysis from Motilal Oswal Financial Services.
Kaumid Marg: Provides data on earnings growth across different indices (Nifty Midcap-150, Smallcap-250, Nifty-100) and specific sectors like Oil & Gas and Metals.
Link: https://www.kaumimarg.com/news/87310-nifty-500-clocks-highest-earnings-growth-in-8-quarters.aspx
