Earnings Season Overview - The earnings season has shown improvement, with a balanced beat-miss ratio of 34% of companies beating profit estimates and 32% missing, indicating a recovery trend after Q2 [12] - The MOFSL universe reported a 16% year-on-year profit growth in Q3FY26, slightly above the 14% estimate [12] Earnings Growth Projections - Nifty earnings are expected to grow approximately 12% annually over FY25-27, with current valuations at around 20.4 times one-year forward earnings, suggesting limited downside if earnings hold [2][12] - Mid and small-cap companies are projected to deliver stronger earnings growth in FY27 compared to large-caps, although broader market valuations are considered stretched [8][12] Key Investment Ideas - In financials, State Bank of India (SBI) and ICICI Bank are highlighted as key picks, with SBI trading at about 12 times FY26 estimated earnings and expected return on equity of 16-18% over FY26-28 [5][12] - ICICI Bank is noted for consistent asset quality improvement, trading at about 20 times FY26 earnings [5][12] - In capital goods, Larsen & Toubro is favored due to a strong order book and expected earnings growth over FY25-27 [6][12] - Bharti Airtel is preferred in telecom, benefiting from tariff hikes and rising data consumption, trading at around 31 times FY27 earnings [6][12] - Mahindra & Mahindra is backed by strong SUV demand and farm equipment recovery, with earnings expected to compound at over 20% over the next two years [7][12] - Infosys remains a top idea in technology despite near-term uncertainties, with ongoing disruptions in IT services being a key monitorable [7][12] Sectoral Insights - Financials, Metals, and Automobiles are anticipated to be key earnings drivers in FY27, potentially contributing nearly two-thirds of incremental profit growth [11][12] - The brokerage emphasizes the importance of decisive policy steps and improving global trade visibility to stabilize foreign investor flows [11][12]
India Inc earnings recovery playing out as expected. 35 stocks to buy after Q3 results
The Economic Times·2026-02-17 03:58