India’s benchmark Nifty50 is expected to record modest profit growth of 4.4 per cent year-on-year (YoY) in the September quarter (Q2FY26), driven primarily by domestic cyclicals, while the banking sector faces headwinds, according to a JM Financial outlook.
Excluding the banking, financial services, and insurance (BFSI) sector, aggregate profit after tax (PAT) for Nifty50 constituents is projected to grow 11 per cent YoY, underscoring a notable divergence between domestic cyclicals and banks. JM Financial’s coverage universe anticipates overall PAT growth of 8.7 per cent YoY for Q2FY26.
Strong contributors are likely to include Oil & Gas (15 per cent weight in earnings) with a 10 per cent YoY gain, IT Services (12 per cent weight) rising 5 per cent, Utilities (7 per cent weight) up 15 per cent, and Metals & Mining (5 per cent weight) surging 55 per cent. Excluding BFSI, the earnings growth is forecast at 13 per cent YoY, and ex-BFSI and Oil & Gas, at 14 per cent YoY.
Among sectoral projections, IT Services are expected to post a 9 per cent YoY increase, Metals & Mining a sharp 49 per cent rise, Utilities 39 per cent, and Telecom 103 per cent, reflecting robust performance outside the banking domain.
In contrast, BFSI profits are projected to decline 3 per cent YoY amid muted loan growth, margin compression, reduced core fee income, lower treasury gains, and elevated credit costs in both private and state-owned banks. Analysts highlight that normalization of net interest margins (NIM) and higher credit costs will remain key headwinds for the sector.
Domestic institutional flows have supported market sentiment, with domestic institutional investors (DIIs) net buyers of USD 25.3 billion in Q2FY26. Foreign institutional investors (FIIs) offloaded USD 9.5 billion in the quarter. Year-to-date, DIIs have remained net buyers at USD 45 billion, while FIIs have been net sellers of USD 4.9 billion, reflecting continued foreign caution toward Indian equities.
Government and Reserve Bank of India (RBI) measures to boost consumption including GST and income tax cuts, interest rate reductions, and enhanced liquidity — are expected to support domestic demand. Sectors sensitive to consumption, such as Autos, Consumer Goods, Cement, Internet, Hotels, and Real Estate, have been upgraded to overweight in model portfolios in anticipation of stronger earnings momentum. |
