Nifty Profit Growth Reaches 10-Quarter High, Driven by Five Key Stocks

The first quarter of FY27 has witnessed a significant upswing in profit margins among Nifty50 companies, reflecting a robust 18% growth year-on-year, outpacing initial expectations by Motilal Oswal Financial Services, which had estimated a 10% increase. This growth is the sharpest recorded in the last ten quarters, primarily driven by five key players—ONGC, Hindalco Industries, Reliance Industries, JSW Steel, and Bharti Airtel—collectively contributing an impressive 60% of the incremental earnings. A notable aspect of this quarter is the wide performance across 19 sectors, showcasing a broad-based recovery that extends beyond the contributions of a few large entities, even as a concentration in profit generation is apparent, with these five firms alone accounting for 73% of the overall profit increase in the brokerage’s coverage universe.

Specific sector performances were particularly noteworthy, especially in oil and gas, which contributed approximately Rs 16,900 crore to the profit uptick, and the metals sector which saw a remarkable turnaround, shifting from being one of the lower contributors a year prior to now commanding the second position in terms of profit boost. Hindalco and JSW Steel, for instance, reported profits soaring by 118% and 96%, respectively, while Vedanta led with an astounding 152% growth. This positive trend in metals aligns with broader market expectations and indicates a potential structural shift in sector dynamics, which investors should monitor closely.

Despite the impressive overall growth, Motilal Oswal’s adjustments to earnings-per-share estimates for fiscal year 2027 remained relatively modest, with an increase of just 0.6% to Rs 1,232. This cautious outlook reflects a mixture of upgraded earnings for major contributors such as Hindalco—which saw the most significant revision at 21.9%—and cut estimates for weaker performers like InterGlobe Aviation, which experienced a substantial 32.8% downward revision. Consequently, while the earnings season displayed net upgrades exceeding cuts, the disparities in performance across sectors and market capitalization segments underline a more complex underlying economic environment.

Additionally, delving into market capitalization analysis, large-cap entities exhibited an overall profit growth of 21%, significantly above Motilal Oswal’s forecast of 14%. Mid and small-cap segments also performed admirably, with profits rising by 23% and 31%, respectively. However, the broader profitability patterns reveal mixed sentiments, as only 57% of large-cap firms surpassed expectations compared to 39% for mid-caps. Notably, the oil marketing sector considerably hindered overall results, reporting a combined loss of Rs 18,100 crore due to the impact of elevated crude prices, illustrating the nuanced challenges that persist even amid prevailing growth narratives.

Source: The Economic Times

(Expert Note: This report was prepared by the Wealthova team.)