Quarterly Earnings Trends Show Gradual Improvement

The December quarter saw exactly half of the companies reporting positive earnings, a notable increase from 43.0% in September 2025 and 40.0% in June 2025. This upward trend suggests a tentative recovery in corporate profitability after a challenging year marked by inflationary pressures and global economic uncertainties. The March 2025 quarter had a slightly better positive result proportion at 44.0%, indicating that the December quarter’s 50.0% is the highest in the last four quarters.

However, the improvement is uneven across market capitalisation segments. Large-cap companies lag behind with only 34.0% reporting positive results, a figure that raises concerns given their dominant weight in benchmark indices. Mid-cap firms have fared better, with 54.0% posting positive earnings, while small caps are close behind at 51.0%. This divergence highlights the resilience of mid and small caps amid macroeconomic headwinds, possibly due to their agility and exposure to domestic demand segments.

Top Performers Across Market Caps

Among large caps, TVS Motor Co. stood out with robust earnings in the automobile sector, benefiting from strong domestic demand and export growth. The company’s ability to manage input costs and ramp up production has helped it outperform peers in a challenging environment for the auto industry.

In the mid-cap space, GE Vernova T&D from the heavy electrical equipment sector delivered impressive results, supported by increased infrastructure spending and government initiatives to boost power transmission capacity. The company’s order book expansion and margin improvement were key drivers behind its strong quarterly performance.

Among small caps, Cupid Ltd. in the FMCG sector emerged as a star performer. The company reported its highest-ever quarterly net sales of ₹93.50 crores, marking a 51.4% growth compared to its previous four-quarter average. Profit before tax (excluding other income) surged by 108.6% to ₹32.38 crores, while net profit after tax soared 112.7% to ₹32.83 crores. Operating profit margin reached a peak of 36.68%, reflecting efficient cost management and strong volume growth. Earnings per share for the quarter stood at ₹1.22, the highest recorded by the company.

Micro and Small Caps Lead Overall Results

The top overall results were dominated by micro and small caps, signalling pockets of strong growth in niche sectors. String Metaverse, a micro-cap player in the paper, forest, and jute products sector, delivered standout numbers, reflecting a rebound in demand for packaging and allied products. Alongside, small caps such as Cupid Ltd. and Indo Thai Securities from the FMCG and capital markets sectors respectively, showcased robust earnings growth, underlining the strength of domestic consumption and financial services.

Sectoral Patterns and Profit Growth Analysis

The FMCG sector continues to be a bright spot, with companies like Cupid Ltd. demonstrating strong volume growth and margin expansion. This sector’s resilience is attributed to steady consumer demand and successful product innovation. Conversely, the automobile sector, while showing pockets of strength in companies like TVS Motor Co., faces challenges from raw material cost inflation and supply chain disruptions.

Heavy electrical equipment firms such as GE Vernova T&D are benefiting from government infrastructure spending, which is expected to sustain momentum in the coming quarters. Capital markets companies like Indo Thai Securities are capitalising on increased market activity and investor participation, contributing to their strong quarterly performances.

Aggregate profit growth across the 802 companies is estimated to have improved, driven primarily by mid and small caps. However, the relatively low positive result proportion among large caps suggests caution for investors focused on blue-chip stocks. The mixed earnings momentum indicates that while some sectors and companies are recovering well, others continue to face headwinds from inflation, global uncertainties, and sector-specific challenges.

Upcoming Earnings to Watch

Market participants will closely monitor the results of key companies scheduled to report shortly, including Sun Pharmaceutical Industries Ltd, GAIL (India) Ltd, and IDFC First Bank Ltd on 31 January 2026. These companies represent critical sectors such as pharmaceuticals, energy, and banking, and their earnings will provide further clarity on the broader economic recovery and sectoral trends.

Investor Takeaways

Investors should note the improving trend in positive earnings results, particularly among mid and small caps, which may offer attractive opportunities given their growth potential. However, the subdued performance of large caps warrants a cautious approach, especially for portfolios heavily weighted towards these stocks. Sectoral differentiation remains key, with FMCG, heavy electrical equipment, and select capital markets firms showing promising fundamentals.

Careful stock selection, focusing on companies with strong earnings momentum, margin expansion, and robust order books, will be crucial in navigating the current earnings season. Monitoring upcoming results from heavyweight sectors will also be important to gauge the sustainability of the recovery.

Summary

The December 2025 quarter earnings season reflects a cautiously optimistic corporate India, with 50.0% of companies reporting positive results – the best in the last four quarters. Mid and small caps are leading the charge, supported by strong performances in FMCG, heavy electrical equipment, and capital markets sectors. Large caps, however, remain a concern with only a third reporting positive earnings. As the market awaits results from major companies in the coming days, investors are advised to focus on quality earnings growth and sectoral strengths to capitalise on emerging opportunities.

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