Quarterly Earnings Trends Show Gradual Improvement

The latest quarter marks a notable uptick in positive earnings outcomes compared to the preceding three quarters. The proportion of companies reporting positive results rose to 52.0% in Dec-2025, up from 43.0% in Sep-2025, 40.0% in Jun-2025, and 44.0% in Mar-2025. This gradual improvement suggests a tentative recovery in corporate profitability amid a challenging macroeconomic backdrop.

However, this aggregate figure masks significant variation when analysed by market capitalisation. Large-cap companies lag behind with only 37.0% reporting positive results, whereas mid-cap and small-cap firms fared better, with 55.0% and 54.0% respectively posting favourable earnings. This divergence highlights the resilience of smaller companies, which may be benefiting from niche market positions or more agile cost structures.

Large-Cap Leaders and Sectoral Highlights

Among large-cap stocks, TVS Motor Company stood out with robust earnings in the automobile sector, reflecting sustained demand and operational efficiencies. Despite the broader large-cap underperformance, TVS Motor’s results underscore pockets of strength within the sector, driven by favourable consumer sentiment and product launches.

In the mid-cap space, GE Vernova T&D delivered impressive results in the heavy electrical equipment sector, benefiting from increased infrastructure spending and government initiatives supporting power transmission upgrades. This performance aligns with the sector’s positive outlook amid rising investments in renewable energy and grid modernisation.

Small-cap companies also showcased notable performers, with Indo Thai Securities in the capital markets sector reporting strong earnings growth, buoyed by increased market activity and higher brokerage revenues. These results reflect the ongoing vibrancy in financial services and the benefits of market volatility for brokerage firms.

Micro-Cap and Small-Cap Standouts

The top overall results were dominated by micro-cap and small-cap companies, signalling pockets of exceptional performance in less-followed segments. String Metaverse, operating in the paper, forest, and jute products sector, emerged as the top micro-cap performer, demonstrating strong operational execution and margin expansion.

Similarly, STEL Holdings, a non-banking financial company (NBFC) with a market size of ₹767.74 crores, delivered an outstanding quarter. The company’s net sales surged by 203.0% compared to its previous four-quarter average, reaching ₹17.20 crores. Profit before tax (excluding other income) grew by 199.8% to ₹17.05 crores, while profit after tax soared by 194.8% to ₹12.58 crores. This quarter marked the highest levels for net sales, PBDIT, PBT less other income, PAT, and earnings per share (EPS) at ₹6.81, reflecting a remarkable turnaround from a mildly bearish stance just days prior.

STEL Holdings’ financial score improved dramatically from 13 to 36 over the last three months, signalling enhanced operational quality and investor confidence. This performance underscores the potential for select NBFCs to capitalise on improving credit demand and asset quality trends.

Sectoral Patterns and Market Implications

The earnings season reveals a nuanced sectoral landscape. While consumer discretionary and automobile sectors show pockets of strength, capital markets and financial services continue to benefit from market volatility and increased trading volumes. Conversely, large-cap companies, often more exposed to global economic headwinds and supply chain disruptions, have struggled to maintain consistent profitability.

Investors should note the resilience of mid and small-cap companies, which may offer attractive opportunities given their higher proportion of positive earnings surprises. However, the overall market remains cautious, with just over half of companies reporting positive results, indicating that challenges such as inflationary pressures, interest rate uncertainties, and geopolitical risks continue to weigh on corporate earnings.

Upcoming Earnings to Watch

Looking ahead, several heavyweight companies are scheduled to announce results imminently, including Jindal Steel Ltd., Nestle India Ltd., and NTPC Ltd. on 30 Jan 2026. These results will be closely scrutinised for indications of industrial demand, consumer spending trends, and energy sector dynamics, potentially setting the tone for the broader market in the coming weeks.

Investor Takeaways

For investors, the current earnings season reinforces the importance of selective stock picking and sectoral analysis. Mid and small-cap stocks with demonstrated earnings momentum and operational improvements warrant attention, while large-cap companies require careful scrutiny given their mixed results.

Quality metrics such as earnings growth rates, margin expansion, and cash flow generation remain critical in differentiating sustainable performers from those facing cyclical pressures. The standout performances from companies like STEL Holdings highlight the potential rewards of identifying emerging leaders within niche sectors.

Overall, the December quarter results suggest a cautiously optimistic outlook for corporate India, with improving earnings trends tempered by ongoing macroeconomic uncertainties.

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