Quarterly Earnings Trends: A Gradual Improvement

The latest quarter marks a notable uptick in positive results compared to the previous three quarters. The proportion of companies reporting positive earnings rose to 54.0% in Dec-2025, up from 42.0% in September, 40.0% in June, and 44.0% in March 2025. This improvement suggests a gradual recovery in corporate profitability after a challenging year marked by inflationary pressures and global economic uncertainties.

However, this aggregate figure masks significant divergence when analysed by market capitalisation. Large caps lag behind with only 34.0% of companies reporting positive results, whereas mid caps lead the charge with 64.0%, followed by small caps at 55.0%. This pattern indicates that mid-sized companies are currently better positioned to capitalise on improving economic conditions, possibly due to greater operational agility and sectoral exposure.

Sectoral and Market Cap Highlights

Among large caps, Hindustan Zinc from the Non-Ferrous Metals sector stood out with robust earnings, reflecting sustained demand and favourable commodity prices. In the mid-cap space, Persistent Systems, a key player in Computers - Software & Consulting, delivered strong results, benefiting from increased digital transformation spending globally. Small caps saw impressive performances from Indo Thai Securities in Capital Markets, Poonawalla Finance in NBFCs, and Waaree Renewables in the Power sector, underscoring the diversity of growth drivers in this segment.

Rajoo Engineers: A Case Study in Mid-Cap Resilience

Among the recent disclosures, Rajoo Engineers Ltd, an industrial manufacturing company with a market cap of ₹1,193.37 crores, demonstrated a very positive financial performance for the December 2025 quarter. The company’s financial score improved from 26 to 28 over the past three months, reflecting enhanced operational efficiency and profitability.

Rajoo’s profit before tax excluding other income (PBT LESS OI) surged by 96.05% to ₹18.88 crores, while net sales expanded by 56.21% to ₹87.60 crores. The profit after tax (PAT) rose sharply by 79.1% to ₹16.84 crores, marking the highest quarterly PAT in the company’s history. Operating profit to net sales ratio also reached a peak of 25.42%, underscoring improved cost management and pricing power.

Additionally, the company’s earnings per share (EPS) hit a record quarterly high of ₹0.94, and cash and cash equivalents at half-year stood at ₹131.71 crores, indicating a strong liquidity position. These metrics collectively highlight Rajoo Engineers’ robust growth trajectory and operational strength amid a challenging macroeconomic backdrop.

Sectoral Patterns and Profit Growth Analysis

The Non-Ferrous Metals sector, represented by Hindustan Zinc, continues to benefit from steady commodity demand and supply constraints, supporting margin expansion. The Computers - Software & Consulting sector, led by Persistent Systems, reflects the ongoing global shift towards digitalisation, with increased IT spending driving revenue growth and margin improvement.

Capital Markets and NBFC sectors, as seen in the small-cap performers Indo Thai Securities and Poonawalla Finance, are capitalising on rising financial activity and credit demand. Meanwhile, the Power sector, with Waaree Renewables, is gaining from the accelerating transition to renewable energy sources, supported by government incentives and rising environmental awareness.

Overall, aggregate profit growth across these sectors and market caps indicates a cautiously optimistic outlook for the Indian corporate sector. While large caps face headwinds from global economic uncertainties and inflationary pressures, mid and small caps are leveraging niche opportunities and sectoral tailwinds to deliver superior earnings growth.

Upcoming Earnings to Watch

Investors should keep an eye on the upcoming results from key companies such as Adani Energy Solutions Ltd, Interglobe Aviation Ltd, and DLF Ltd, all scheduled to report on 22 January 2026. These companies operate in sectors sensitive to economic cycles and policy changes, and their performance will provide further clarity on the sustainability of the current earnings momentum.

Outlook and Investor Implications

The December quarter earnings season reinforces the importance of selective stock picking, with mid-cap and small-cap companies currently offering more attractive growth prospects. Investors should focus on companies demonstrating strong operational metrics, improving profitability, and robust cash flows, as exemplified by Rajoo Engineers and other top performers.

Large caps, while offering stability, require careful scrutiny given the lower proportion of positive results and ongoing macroeconomic challenges. Sectoral themes such as digital transformation, renewable energy, and financial services remain key drivers of earnings growth and should be central to portfolio construction strategies.

In summary, the earnings landscape for Dec-2025 is characterised by a gradual recovery with pockets of strong performance. A balanced approach that combines quality large caps with high-potential mid and small caps is likely to yield favourable risk-adjusted returns in the near term.

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