MUMBAI: India Inc.’s revenue recovery gathered pace in the March quarter (Q4FY26) as more companies broke out of sluggish single-digit growth and returned to double-digit expansion. But the rebound remained concentrated in premium consumption, infrastructure and capital-market-linked businesses, prompting analysts to caution that recovery remains uneven and could come under pressure if rising inflation starts squeezing demand and margins in FY27.
A Mint analysis of 1,234 companies that have reported earnings so far showed the share of firms posting 10–20% year-on-year revenue growth rose to 21% in Q4 from 20% in Q1, while those reporting 20–50% growth also rose to 21% from 19%. Companies reporting more than 50% growth climbed to nearly 6% from just over 4% during the same period.
At the same time, the share of companies reporting revenue decline eased to 30% in Q4 from 33% in Q1 and 36% in Q2, when weak domestic demand and the US tariff standoff had weighed heavily on toplines.
The sharpest improvement came in the slow-growth category. The share of companies reporting 0-10% revenue growth fell to 23% in Q4 after rising steadily from 24% in Q1 to 27% in Q3, suggesting more companies moved into faster growth brackets by the end of FY26.
The improvement coincided with stronger rural cashflows after a favourable monsoon, easing inflation, the rationalization of goods and services tax (GST) slabs, and festive-led discretionary spending, which together supported consumption in the second half of FY26. A lower base through FY25 also aided growth.
Uneven rebound
The recovery, however, remained concentrated in a narrow set of sectors.
A deeper analysis of the fastest- and weakest-growing companies across Q3 and Q4 showed sustained momentum in capital-market intermediaries, wealth managers, artificial intelligence (AI) and cloud infrastructure providers, specialized pharma manufacturers, luxury jewellery retailers, and electrical equipment makers linked to grid upgrades and renewable energy infrastructure.
By contrast, textiles and apparel exporters, unsecured retail lenders, commodity chemical makers, traditional industrial machinery firms and generic drug manufacturers continued to report revenue contraction through Q3 and Q4.
According to experts, these sectors remained weighed down by weak global demand, Chinese dumping pressures, sluggish factory expansion and cautious lower-income consumption.
The divergence suggests India Inc.’s recovery in H2FY26 was driven largely by premium consumption, infrastructure spending and businesses with stronger competitive advantages.
Pawan Bharaddia, co-founder and chief investment officer at Equitree Capital, noted that typically such divergences are favourable for a bottom-up investing approach, “because the mispricing often sits in businesses the broader market is choosing to ignore.”
“Sustaining Q4’s momentum in the June quarter could be challenging as temporary tailwinds begin to fade.” said Anil Rego, founder and fund manager at Right Horizons PMS. “Q1 (FY27) could see moderation after Q4’s sharp acceleration, with consumption leadership remaining narrow and premium-focused.”
Rego warned that the narrow earnings leadership raises valuation risks, leaving markets vulnerable to even minor slowdowns in growth or profitability within leadership sectors.
Cost pressures
The broader operating environment is also turning more challenging.
During FY25 and early FY26, many companies protected earnings through cost rationalization, softer commodity prices and selective pricing despite weak demand. But rising crude oil prices amid the West Asia conflict are now increasing logistics, packaging, fuel and raw material costs across sectors.
Industry executives said higher prices of milk, wheat and edible oils are also squeezing margins, pushing FMCG companies to raise prices and reduce pack sizes in ways that could slow the recovery in consumer demand, as Mint reported earlier.
That raises the risk of a tougher FY27, analysts said, as companies could lose the cushion of benign input costs just as higher fuel prices and borrowing costs begin weighing on demand.
At this juncture, pricing power becomes critical, said Equitree Capital’s Bharaddia.
“B2B companies with genuine technical or engineering advantages can typically pass on higher input costs and protect margins,” he said. “But commoditised businesses selling undifferentiated products have far less room to do so, raising the risk of a double squeeze from weaker topline growth and margin pressure simultaneously.