Q2 results: September quarter earnings beat estimates; metals, OMCs lead the upside, says Kotak Securities

While the September quarter earnings of Indian corporates continue to show subdued trends in select pockets, the overall earnings have been slightly above estimates, led by metals and mining companies and oil marketing companies (OMCs), according to domestic brokerage firm Kotak Securities.

"The Q2FY26 earnings season shows subdued trends in mass-consumption items but an uptick in select discretionary segments, modest IT services demand, and moderate loan growth for banks. Nonetheless, aggregate earnings are ahead of our estimates, with metals

and mining and OMCs driving the beat in the Kotak Institutional Equities (KIE) universe earnings print," said Kotak Institutional Equities (Kotak Securities) in a report.

The brokerage firm highlighted that the 26 Nifty 50 companies that have reported their Q2 results so far have shown modest earnings growth on expected lines, with companies reporting year-on-year (YoY) growth of 8.6 per cent in revenue, 9.1 per cent in EBITDA, and 3.1 per cent in profit after tax (PAT).

Kotak has mildly upgraded its Nifty 50 earnings estimates for FY26, noting a neutral-to-optimistic outlook of companies.

According to the brokerage firm, HDFC Bank, ICICI Bank, and Reliance Industries were the major Nifty 50 companies that witnessed decent earnings upgrades over this period.

"Companies maintained a neutral-to-optimistic outlook, leading to our Nifty 50 earnings estimates seeing mild upgrades over the Q2FY26 earnings season," said Kotak.

"We currently expect 10 per cent and 17 per cent growth in net profits of the Nifty 50 Index in FY26E and FY27E, respectively, broadly unchanged over the Q2FY26 results season. Consensus estimates appear to be similarly placed over the past month," Kotak said.

Stable quarter for banks and IT; consumer companies face GST transition challenge

Banks and IT heavyweights delivered broadly stable Q2 numbers. According to Kotak, most banks reported modest credit growth, slightly higher-than-expected net interest margins (NIMs), and largely stable asset quality.

"We note that most banks reported stable-to-improving asset quality trends, with large banks seeing signs of stabilisation in their unsecured book," said Kotak.

The growth of IT services companies also broadly stabilised in Q2FY26, while margins remained stable.

However, Kotak added IT services companies maintained a "cautious outlook, given continued headwinds of a challenging macro environment and growing disruption risks."

Consumer companies witnessed weak volume growth due to GST-related de-stocking. However, several companies reported a modest uptick in urban demand in their outlook commentary, Kotak said.

Kotak expects volume growth for consumer companies to pick up in Q3 FY26, led by a rise in underlying demand and channel restocking.

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