Quarterly Earnings Trends: A Clear Upswing

The latest results for the December 2025 quarter indicate a pronounced recovery in corporate earnings compared to the preceding three quarters. The proportion of companies reporting positive results surged to 64.0%, up from 42.0% in September 2025, 40.0% in June 2025, and 44.0% in March 2025. This improvement underscores a broad-based earnings revival, reflecting better operational efficiencies, easing input costs, and a more favourable demand environment across sectors.

However, this aggregate figure masks considerable divergence when analysed by market capitalisation. Large cap companies reported a relatively modest 43.0% positivity rate, indicating ongoing challenges in some heavyweight sectors. In contrast, mid cap firms delivered a robust 72.0% positive results ratio, while small caps outperformed with an impressive 77.0% positivity, highlighting the nimbleness and growth potential of smaller enterprises in the current economic climate.

Sectoral and Market Cap Leaders

Among large caps, Union Bank of India stood out as a top performer within the public sector banking space, demonstrating resilience amid a challenging credit environment. The bank’s results were bolstered by improved asset quality and higher net interest margins, contributing to a positive earnings surprise that helped lift investor sentiment.

Mid cap stocks also showcased strength, with Bank of Maharashtra emerging as a sectoral leader in public sector banking. The bank’s earnings growth was driven by a combination of robust loan growth and prudent provisioning, which helped it surpass market expectations. This performance has led to an upgrade in analyst ratings, with several brokerage houses now assigning a Buy rating, reflecting confidence in the bank’s turnaround prospects.

Small cap stocks were the standout performers this quarter, with Indo Thai Securities Ltd delivering an exceptional set of results in the capital markets sector. The company reported net sales of ₹27.71 crores for the quarter, representing a staggering 125.6% growth compared to its previous four-quarter average. Profit before tax (excluding other income) soared by 224.8% to ₹22.49 crores, while net profit after tax surged 218.4% to ₹17.00 crores, all marking record highs for the company.

Indo Thai Securities: A Small Cap Powerhouse

Indo Thai Securities’ outstanding quarterly performance has been a key highlight of this earnings season. The company’s financial metrics have improved significantly over the past three months, with its mojo score rising from 36 to 38, signalling enhanced operational and financial health. The firm’s earnings per share (EPS) for the quarter reached ₹13.98, the highest on record, supported by strong cash and cash equivalents of ₹140.83 crores as of the half-year mark.

This surge in profitability is attributed to the company’s strategic positioning in capital markets, benefiting from increased trading volumes and favourable market conditions. The company’s PBDIT and PBT (excluding other income) also hit record highs at ₹23.24 crores and ₹22.49 crores respectively, underscoring operational leverage and cost control measures.

Other Notable Small Cap Performers

Alongside Indo Thai Securities, other small cap companies such as Navkar Corporation in transport services and Krishana Phosphates in fertilisers have delivered top-tier results. Navkar Corporation’s earnings growth was supported by increased freight volumes and improved logistics efficiencies, while Krishana Phosphates benefited from higher fertiliser demand and better input cost management. These companies exemplify the growth potential within the small cap segment, which continues to attract investor interest due to their agility and sectoral tailwinds.

Large Cap Challenges and Outlook

Despite pockets of strength, large cap companies have faced headwinds that have constrained earnings growth. The 43.0% positive result ratio reflects ongoing pressures in sectors such as banking, energy, and industrials, where margin compression and subdued demand have weighed on profitability. However, select large caps like Union Bank of India have bucked the trend, suggesting that recovery is underway but uneven.

Looking ahead, the upcoming results from heavyweight firms such as Jio Financial Services Ltd and HDFC Life Insurance Company Ltd scheduled for 15 January 2026 will be closely watched for further cues on sectoral momentum and earnings sustainability. These companies operate in high-growth segments and their performance could influence broader market sentiment.

Aggregate Profit Growth and Market Implications

The aggregate profit growth across the 78 companies reporting this quarter points to a gradual but steady improvement in corporate earnings. The marked outperformance of mid and small caps relative to large caps suggests a rotation in investor preference towards growth-oriented and nimble companies that can capitalise on sectoral upswings and market opportunities more swiftly.

Investors should note that while the overall earnings environment is improving, the disparity between market cap segments and sectors calls for a selective approach. Companies with strong balance sheets, robust cash flows, and clear growth drivers are likely to continue outperforming. The recent upgrades and positive revisions in analyst ratings for mid and small cap banks and capital markets firms reinforce this view.

Conclusion: Earnings Season Signals Cautious Optimism

The December 2025 quarter earnings season has delivered a cautiously optimistic outlook for Indian equities. The surge in positive results to 64.0% from a low base in previous quarters is encouraging, particularly the strong showing from mid and small caps. Large caps remain mixed but show signs of stabilisation with select sector leaders posting encouraging numbers.

Market participants should continue to monitor upcoming results from key large cap companies and remain attentive to sectoral earnings trends. The current environment favours a balanced portfolio approach that leverages the growth potential of mid and small caps while selectively participating in large cap recovery stories.

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