Quarterly Earnings Trends: A Gradual Improvement

The latest quarter marks the highest proportion of positive results in the last four quarters, signalling a tentative recovery in corporate profitability. The December quarter’s 49.0% positive result ratio contrasts favourably with the 44.0% recorded in March 2025 and the 40.0% in June 2025, indicating a gradual improvement in earnings momentum. However, this still suggests that just under half of the companies are reporting earnings beats or growth, underscoring ongoing challenges in the broader economic environment.

Sectoral and market cap segmentation reveals further insights. Large-cap companies have lagged with only 36.0% reporting positive results, a figure that remains subdued compared to mid-cap and small-cap peers. Mid-cap firms have shown the strongest earnings resilience, with 54.0% posting positive results, while small caps are close behind at 50.0%. This divergence highlights the relative agility and growth potential of mid and small caps amid macroeconomic headwinds affecting larger, more established firms.

Market Capitalisation Breakdown: Mid Caps Lead the Charge

Large-cap companies, often viewed as bellwethers of the economy, have struggled to maintain earnings growth, with only about one-third delivering positive results. This may reflect the impact of inflationary pressures, input cost inflation, and subdued demand in key sectors such as automobiles and banking. Notably, TVS Motor Co., a leading player in the automobile sector, emerged as a top performer among large caps, demonstrating resilience through operational efficiencies and product mix optimisation.

Mid-cap companies have outperformed expectations, with over half reporting positive earnings surprises. GE Vernova T&D, operating in the heavy electrical equipment sector, stood out with robust order inflows and margin expansion, benefiting from increased infrastructure spending and government initiatives. This sectoral tailwind has buoyed mid-cap earnings, contributing to their superior performance relative to large caps.

Small caps have also shown encouraging results, with 50.0% positive outcomes. Cupid, a player in the FMCG sector, has been a notable contributor, leveraging strong brand equity and rural market penetration to drive sales growth despite inflationary pressures. The FMCG sector’s defensive characteristics have helped small caps maintain steady earnings growth in a volatile environment.

Exceptional Performers Across Market Caps

Among the top performers, micro-cap String Metaverse in the Paper, Forest & Jute Products sector has delivered standout results, reflecting niche market leadership and operational leverage. Small-cap Mahindra Lifespace Developers Ltd. in the Realty sector has also impressed with a remarkable earnings turnaround, posting a mild bullish trend since early February 2026. Its December quarter net sales surged by 712.5% compared to the previous four-quarter average, reaching ₹459.16 crores. Profit before tax (excluding other income) soared by 341.3% to ₹93.69 crores, while PAT grew 115.6% to ₹87.15 crores, marking record highs for the company.

Mahindra Lifespace’s operating profit to interest ratio hit an all-time high of 16.83 times, underscoring strong operational cash flow and low leverage. The company’s debt-equity ratio stood at a conservative 0.10 times, the lowest in recent history, while cash and cash equivalents rose to ₹334.73 crores. Earnings per share for the quarter reached ₹5.10, the highest recorded, signalling robust shareholder returns. These metrics collectively indicate a well-managed balance sheet and operational efficiency that have driven the company’s upgraded outlook.

Sectoral Patterns: Infrastructure and Realty Gain Traction

The heavy electrical equipment and infrastructure sectors have benefited from government spending and policy support, with companies like GE Vernova T&D capitalising on increased demand for transmission and distribution assets. This has translated into margin expansion and order book growth, supporting positive earnings revisions.

Realty companies, exemplified by Mahindra Lifespace, have shown signs of recovery as demand for residential and commercial properties picks up. The sector’s improved cash flows and deleveraging efforts have contributed to better-than-expected profitability, despite lingering concerns over interest rate volatility and regulatory changes.

Conversely, large-cap sectors such as automobiles have faced headwinds from raw material cost inflation and subdued consumer demand, limiting earnings growth. However, companies like TVS Motor Co. have managed to offset some pressures through product innovation and cost control measures.

Outlook and Upcoming Results

Looking ahead, the market awaits results from heavyweight companies such as Tata Power Company Ltd, Bajaj Finserv Ltd, and Trent Ltd, all scheduled to report on 04 February 2026. These results will be closely watched for indications of sustained earnings momentum and sectoral shifts.

Investors should remain cautious but attentive to mid and small-cap opportunities, where earnings growth appears more robust. The mixed results season underscores the importance of selective stock picking and sectoral analysis in navigating the current market environment.

Summary

The December 2025 quarterly earnings season reveals a market in transition, with mid and small caps outperforming large caps amid sectoral divergences. While overall positive results have improved to 49.0%, challenges remain for large-cap companies facing inflationary and demand pressures. Exceptional performers like Mahindra Lifespace Developers Ltd and GE Vernova T&D highlight the potential for earnings growth in infrastructure and realty sectors. Investors should focus on companies demonstrating strong fundamentals, operational efficiency, and prudent balance sheet management to capitalise on evolving market dynamics.

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