The domestic stock markets are now in a healthier state compared to last year as the earnings cycle appears to be bottoming out, according to a report by Motilal Oswal Financial Services. The report highlighted that the earnings for the second quarter of FY26 have largely been in line with expectations, with the intensity of earnings cuts moderating.
“Although Indian equities have registered a lackluster performance over the past one year, the Indian markets now appear to be in a healthy state versus last year,” the report said. It also noted that the earnings cycle is bottoming out, with growth expected to accelerate into double digits going forward. Valuations are also seen as reasonable, with the Nifty trading at 21.4 times earnings, close to its long-period average (LPA) of 20.8 times.
“Any signs of earnings growth acceleration should support valuation expansion,” the report added. The brokerage believes that a series of measures undertaken by the government will help reset the trajectory of corporate earnings as domestic reforms continue. It also stated that the resolution of the ongoing tariff stalemate will be a key external catalyst for the market.
On the mid- and small-cap front, the report observed that while valuations in this segment remain expensive, the report mentioned that the firm Motilal Oswal continues to focus selectively on high-conviction SMID (small and mid-cap) names within its portfolio. Analysing the aggregate performance of 27 Nifty companies in the second quarter of FY26, the report said that Nifty stocks have reported sales, EBITDA, PBT and PAT growth of 9 per cent, 8 per cent, 5 per cent and 5 per cent year-on-year respectively, it is higher than the estimates.
Of these, five companies surpassed PAT estimates by more than 5 per cent, while seven missed expectations by a similar margin. On the EBITDA front, six companies exceeded estimates, while three missed them. EBITDA, PBT and PAT are financial metrics that measure a company’s profitability at different stages, with EBITDA showing earnings before interest, taxes, depreciation and amortisation, PBT representing profit before taxes, and PAT being the final net profit after all expenses and taxes are deducted.
Conversely, Coal India, Axis Bank, Eternal, Hindustan Unilever (HUL) and Kotak Mahindra Bank dragged overall Nifty earnings lower. In total, seven companies within the Nifty reported lower-than-expected profits, five recorded a beat, and fifteen delivered in-line results, the report added. As per report all these factors are pointing that the situation in the Indian markets have improved as compared to the last year.
Published on November 3, 2025
