Quarterly Earnings Overview and Trends
Out of the 42 companies that declared results for the December 2025 quarter, 67.0% reported positive earnings surprises, a significant jump compared to the preceding quarters where positive results hovered between 40.0% and 44.0%. This quarter’s improvement marks a notable turnaround from the subdued earnings environment witnessed in the first three quarters of the fiscal year, reflecting better operational execution and possibly easing macroeconomic pressures.
Breaking down the trend over the last four quarters, the proportion of companies beating expectations was 44.0% in March 2025, 40.0% in June 2025, 42.0% in September 2025, and a robust 67.0% in December 2025. This upward trajectory suggests that companies have adapted well to the evolving market conditions, with cost controls and revenue growth strategies beginning to pay dividends.
Market Capitalisation Segmentation: Divergent Performances
Examining results by market capitalisation reveals a stark contrast in earnings momentum. Large cap companies reported a modest 34.0% positive results ratio, indicating a cautious recovery phase for the heavyweight constituents of the market. In contrast, mid cap stocks delivered a flawless 100.0% positive result rate, underscoring their resilience and growth potential amid a challenging macroeconomic backdrop. Small caps also impressed with a 73.0% positive result ratio, reinforcing their role as key drivers of market dynamism.
This divergence highlights the ongoing rotation of investor interest towards mid and small cap segments, where earnings growth is more pronounced and valuations remain attractive relative to large caps. The mid cap sector’s perfect positive result rate is particularly noteworthy, signalling strong fundamentals and operational agility.
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Sectoral Highlights and Top Performers
Among large caps, HCL Technologies from the Computers - Software & Consulting sector stood out with a strong earnings beat, reflecting sustained demand for IT services and digital transformation projects globally. The company’s ability to maintain margin expansion amid inflationary pressures was a key highlight, supporting its upgraded outlook.
In the mid cap space, Indian Renewable
Small caps were led by Krishana Phoschem Ltd. Krishana Phoschem’s financial health remains robust, with a low debt-equity ratio of 0.93 times and a high debtors turnover ratio of 4.20 times, indicating efficient working capital management. Despite a slight downgrade in its mojo score from 32 to 31 over the past three months, the company’s fundamentals remain strong, and it has shifted from a bullish to a mildly bullish stance as of 1 January 2026 at its current price level. Aggregate Profit Growth and Market Implications The aggregate profit growth across the 42 companies reflects a broad-based recovery, with mid and small caps driving the momentum. The surge in net sales and profitability in these segments suggests that domestic demand and sector-specific tailwinds are supporting earnings expansion. However, the relatively subdued positive result ratio among large caps indicates that global uncertainties and margin pressures continue to weigh on the largest market players. Investors should note the sectoral nuances, with technology, renewable finance, and fertilisers emerging as key beneficiaries of the current economic environment. The strong performance of Krishana Phoschem exemplifies how niche small caps with solid balance sheets and growth visibility can outperform in volatile markets. Looking ahead, the market will closely watch upcoming results from heavyweight names such as HDB Financial Services Ltd, Union Bank of India, and Infosys Ltd scheduled for 14 January 2026. These results will provide further clarity on the sustainability of earnings growth and sectoral trends as the fiscal year progresses. Investor Takeaways and Strategic Considerations Given the current earnings landscape, investors may consider increasing exposure to mid and small cap stocks that have demonstrated consistent earnings growth and operational resilience. The contrasting performance between market cap segments underscores the importance of selective stock picking and sectoral diversification. Large caps, while offering stability, may require a more cautious approach until clearer signs of margin recovery and revenue growth emerge. Meanwhile, mid caps with strong fundamentals and small caps with proven growth trajectories present compelling opportunities for capital appreciation in the near term. Overall, the December 2025 earnings season has reinforced the market’s bifurcated nature, with pockets of robust growth amid broader caution. Investors should continue to monitor quarterly updates closely and adjust portfolios to capitalise on emerging trends. Summary The December quarter results have delivered a welcome improvement in earnings beats, particularly among mid and small cap companies. With 67.0% of stocks reporting positive surprises, the market is witnessing a gradual earnings recovery. Sectoral leaders such as HCL Technologies, Indian Renewable, and Krishana Phoschem have set the tone for growth, supported by strong sales and profit expansions. While large caps remain cautious, the overall earnings environment is encouraging, signalling potential for sustained market momentum in 2026. Unlock special upgrade rates for a limited period. Start Saving Now →
