Q2FY26 Earnings Preview: India Inc’s Calm Amid Global Crosswinds

As global headwinds persist, the September-quarter earnings season may once again prove why Indian markets have become the safe harbour of global investing [EasyDNNnews:PaidContentStart]

Macroeconomic Backdrop: The Economy That Refuses to Slow Down

While much of the global economy continues to wobble under the weight of inflation, debt, and geopolitical fatigue, India’s macro setup is quietly strengthening. 

Across the world, economic narratives are diverging. China, once the growth engine of Asia, now faces rising Banking stress; its Real Estate-linked non-performing assets are climbing and debt-to-GDP ratios have breached unsustainable thresholds. The concern is structural: local governments and shadow banking entities are struggling to absorb losses from years of property speculation. 

In contrast, the U.S. economy surprised to the upside in Q2, led by a rebound in capital spending, particularly in AI-driven investments, and by lower import dependence. Yet, the optimism is tempered by ballooning fiscal deficits and a national debt crossing alarming levels. This has sparked fears of future policy tightening. 

Europe, meanwhile, continues to muddle through. The Eurozone’s mixed data hides deeper fault lines, with France’s political instability pushing government bond yields to levels higher than some corporate borrowing costs. This reflects a crisis of confidence in governance and debt sustainability. 

Against this global turbulence, India stands out as a rare island of fiscal discipline and stability. The country recently earned a credit upgrade after 18 years, underscoring its improved fiscal prudence, policy credibility, and ability to manage inflation even amid supply shocks. 

The RBI’s October 2025 Monetary Policy Committee (MPC) statement reflected this confidence. It maintained policy rates at 5.5 per cent, retained a neutral stance, and acknowledged the economy’s solid footing. Growth projections for FY26 were kept intact at 7 per cent, signalling confidence in India’s ability to withstand external shocks. 

Adding to the resilience is the rupee, which, while modestly weaker, has become an enabler rather than a risk. The mild depreciation has improved export competitiveness, especially for software, engineering, and textile sectors. As domestic reforms deepen, including GST rate cuts, targeted Tax relief, and ongoing rate reductions, the combined policy thrust is helping revive consumption demand across urban and semi-urban segments. 

India maintains a 7 per cent growth trajectory with sub-5 per cent inflation even as global peers falter, a combination that continues to underpin corporate earnings resilience. 

Fiscal Pulse: India’s Policy Pivot from Caution to Confidence
India’s fiscal framework continues to evolve from damage control to proactive enablement, underpinned by a widening tax base and stronger compliance. In Q2 FY26 (July–September 2025), GST collections demonstrated healthy momentum, averaging close to ₹2 lakh crore per month. Gross collections in September 2025 stood at ₹1.89 lakh crore, a 9.1 per cent rise year-on-year from ₹1.73 lakh crore in September 2024, the highest growth rate in four months. August 2025 saw ₹1.86 lakh crore, up 6.5 per cent year-on-year, while July’s net collections (after refunds) rose 1.7 per cent year-on-year to ₹1.68 lakh crore. The steady pickup across months highlights India’s deepening formalisation and improving tax efficiency, reinforcing fiscal resilience amid a complex global environment. 

Recent GST reforms, particularly rate reductions in select consumer and healthcare categories, have added discretionary income back into households, encouraging spending. Similarly, tax reliefs for lower-income segments and targeted consumption stimulus in sectors affected by global tariffs, especially those countering new U.S. import barriers, have added a layer of domestic resilience. 

The government’s capital expenditure momentum under PM Gati Shakti, PLI, and Defence infrastructure modernisation continues unabated. Even as the global environment tightens, India’s fiscal math remains sound, thanks to robust revenue buoyancy and better deficit management. 

This confidence was reflected in the sovereign upgrade, which not only improves India’s global borrowing profile but also signals policy consistency, something global investors crave amid the uncertainty of Western fiscal policies. 

The domestic focus now is two-fold:
1. To buffer global trade shocks through domestic substitution and production capacity, and
2. To stimulate local demand through infrastructure buildout and consumption-friendly measures. 

GST Collection in Q2FY26

Market Snapshot: Stability Is the New Story
If the economy looked calm, the market behaved the same way. After a volatile start to FY26, Indian equities settled into a rhythm in Q2. The Nifty 50 added around 2.8 per cent, while the Sensex gained 3.1 per cent. 

But it was the BSE 500, the barometer of India’s broad market, that stood out, rising nearly 4.2 per cent during the quarter. This widening market participation tells a story investors love: it is no longer just about large caps. Smaller companies, especially those with exposure to domestic consumption, capital goods, and financial services, have begun to attract serious attention. 

Sectors like autos, power, and capital goods led the charge, while IT and metals saw some fatigue. Institutional investors have been reshuffling portfolios, tilting towards companies that can deliver earnings irrespective of global cycles. 

Interestingly, foreign investors’ net selling reduced in September 2025, sensing comfort in India’s macro fundamentals and political continuity. 

Market Performance in Q2FY26 – Nifty, Sensex, BSE 500 and Sector Winners

The Earnings Mood: Moderation with Meaning
As Q2FY26 results start rolling in, analysts are not looking for fireworks. Instead, the focus is on resilience, how companies are protecting margins and navigating slow global demand. The street expects mid-to-high single-digit growth in revenues, and an uptick in profitability in sectors where raw material costs have cooled. Think cement, autos, and parts of industrial manufacturing. The market’s comfort lies in predictability. After years of volatility, first from Covid, then inflation, and now geopolitics, stable earnings growth has become the new alpha. 

Sectoral Narratives: What’s Likely Shaping Q2FY26
In the September quarter, expectations are that earnings growth will be led by Financials, Power, and Autos, with Healthcare and Industrials providing steady support. Tech, meanwhile, is in a transition phase, as global IT budgets remain tight, but early signs of AI-led efficiency spending are emerging. 

Technology: Reset Before the Revival
▪️The IT sector is in a reset phase, quietly preparing for the next digital wave.
▪️Client budgets remain cautious, but spending is shifting toward cost efficiency and AI-driven productivity gains.
▪️Top firms are optimising headcount and improving utilisation rather than chasing volume growth.
▪️Margins are expected to remain stable, aided by operational discipline and a supportive currency.
▪️The broader thesis: earnings may be subdued now, but the groundwork for AI-led growth is being laid. 

BFSI: Normalising Margins, Normalising Growth
The quarter is expected to reflect slower sequential growth as the benefits of earlier loan repricing fade and deposit costs stabilise at higher levels. Credit growth remains healthy, led by retail, SME, and select corporate segments, though the pace has moderated from last year. Deposit mobilisation continues steadily, but competition for retail deposits and elevated term rates keep funding costs firm. Consequently, net interest margins may compress further, particularly for private banks, while PSU banks could see steadier spreads. 

Treasury income should stay muted due to adverse yield movements, while fee income remains stable, supported by digital payments and cards. Operating expenses stay elevated from tech investments and wage hikes, but credit costs remain benign, reflecting contained asset quality risks. 

Among NBFCs, growth momentum continues though margin pressure persists in microfinance and gold loan segments. Diversified and vehicle financiers should remain steady, while housing financiers sustain healthy disbursements. 

Overall, Q2FY26 appears to be a transitional quarter, marking the trough in margins and earnings before recovery sets in during H2FY26. With deposit repricing nearly complete, stable credit growth, and easing funding costs, the BFSI sector is poised to regain earnings traction, moving from cyclical moderation to sustainable compounding. 

Oil & Gas: Refining Stability, Energy Equilibrium
▪️Energy companies are walking a fine line between refining strength and crude volatility.
▪️Refining spreads remain healthy, cushioning marketing margins even as crude prices fluctuate.
▪️Upstream players may see steady realisations, while gas transportation continues to benefit from consistent demand.
▪️The sector’s resilience comes from its diversification, downstream, upstream, and gas all balancing one another.
▪️For investors, the theme is earnings stability amid commodity unpredictability. 

Utilities & Power: Demand Uninterrupted
▪️Power demand remains firm, supported by rising industrial output, data centre activity, and urbanisation.
▪️Utilities continue to post predictable earnings growth, while renewable energy players enjoy a steady flow of capacity additions and order wins.
▪️Ancillary suppliers, cables, Transformers, EPC contractors, are witnessing a revival in Order Books. 
▪️The key driver here is policy visibility and execution discipline.
▪️Unlike earlier cycles, the sector is no longer about scarcity; it is about scale and transition. 

Metals & Mining: Temporary Shine, Structural Watch
▪️The metals cycle looks brighter this quarter, but part of the glow may come from a base-effect boost.
▪️While demand from infrastructure and autos holds, prices of key metals remain range-bound. 
▪️Margins are expected to stabilise after a volatile FY25, with cost controls cushioning spreads. 
▪️The real focus will be on management commentary on export orders and domestic demand sustainability. 
▪️In essence, the sector is shifting from recovery to recalibration. 

Automobiles: Riding the Festive Tailwind
▪️Auto earnings are set for another quarter of balanced growth.
▪️Festive pre-bookings, new launches, and improved rural sentiment are supporting passenger and two-wheeler demand.
▪️Stable raw-material prices are helping protect margins even as competition intensifies. 
▪️Ancillary companies linked to EVs and premiumisation continue to find traction. 
▪️The broader trend suggests that autos are evolving from a cyclical trade to a structural consumption story. 

Consumer Discretionary & FMCG: Cost Relief and Consumption Rebuild
▪️After several subdued quarters, cost relief and policy stimulus are beginning to lift consumer sentiment.
▪️Lower input costs and recent GST adjustments are aiding margin recovery. 
▪️Rural volumes, though still fragile, are gradually stabilising, while urban demand stays firm.
▪️Companies are likely to report moderate revenue growth with expanding profitability. 
▪️The focus now shifts from pricing power to volume recovery and promotional discipline. 

Pharmaceuticals & Healthcare: Slow Healing, Steady Pulse 
▪️Pharma remains a story of steady compounding rather than surprise beats.
▪️Domestic demand in chronic therapies remains strong, while export markets stabilise after a challenging year. 
▪️Input costs have eased, supporting margin normalisation, and compliance standards continue to strengthen global positioning. 
▪️Hospitals and diagnostics, meanwhile, are expanding beyond metros, with rising occupancy, better case mixes, and digital integration. 
▪️Together, these segments represent defensive earnings stability within a volatile global market. 

Capital Goods & Infrastructure: The Engine Beneath the Surface 
▪️Industrial manufacturing and infrastructure remain the quiet engines of this earnings season. 
▪️Order inflows are steady, execution momentum is improving post-monsoon, and operating leverage is beginning to show.
▪️The visibility of multi-year government and privatesector capex ensures that the narrative extends well beyond FY26.
▪️This sector exemplifies the theme of earnings visibility over volatility. 

Cement & Building Materials: Costs Easing, Demand Intact
▪️Cement players continue to benefit from lower energy and freight costs, even as the monsoon temporarily moderated volumes.
▪️Realisations remain steady thanks to pricing discipline. 
▪️With infrastructure and housing activity set to accelerate in the second half, earnings trajectory appears intact.
▪️This remains a steady compounder in India’s Construction story. 

Hospitality & Internet Platforms: The New-Age Momentum
▪️Hotels and platforms represent India’s post-pandemic growth frontier. 
▪️Hospitality companies are maintaining rate discipline and leveraging strong corporate and MICE bookings.
▪️Internet platforms, on the other hand, remain sentimentdriven, where investor attention is shifting toward unit-economics improvement and confident management commentary rather than quarterly profits.
▪️In both sectors, visibility and conviction are becoming the true currencies of market value.
▪️The common thread across all sectors this quarter is earnings normalisation.
▪️While revenue growth may appear modest, the quality of profits, cleaner balance sheets, disciplined costs, and visibility, remains strong.
▪️Investors are likely to respond less to surprises and more to conviction.
▪️The market’s message is clear: consistency has become the new catalyst. 

Themes to Watch for H2FY26
▪️Consumption Revival, as GST adjustments settle and rural incomes rise.
▪️Private Capex Revival, visible signs beyond government push.
▪️Energy Transformation, the renewables wave gaining industrial depth.
▪️Healthcare Penetration, from metros to towns.
▪️AI & Productivity Cycle, next frontier for Indian IT and manufacturing.
▪️Monetary Stability, RBI’s cautious optimism preserving confidence. 

Outlook: Slow and Steady Wins This Race
In a global landscape marked by uneven growth, from China’s mounting debt stress to America’s fiscal overhang, India’s market narrative continues to stand out for its rare balance of stability and opportunity. The world’s second-largest emerging market is no longer chasing adrenaline-fuelled rallies; it is quietly compounding, one earnings season at a time. 

The Composed Phase of Growth
▪️The beauty of India’s current market cycle lies in its composure.
▪️Unlike the euphoric upswings of the past, today’s rally feels deliberate, guided by corporate earnings discipline and policy-driven visibility rather than sentiment alone.
▪️GDP expansion remains steady, inflation is contained within comfort levels, and fiscal consolidation is progressing as planned.
▪️Corporate India, meanwhile, is learning to grow through uncertainty rather than around it.
▪️Earnings may not sprint, but they continue to march forward, quarter after quarter, reinforcing the idea that consistency, not speed, creates enduring wealth.
▪️As one fund manager aptly observed, ‘We’re not in a bull run; we’re in a marathon — and India’s pace is sustainable. 

A Shift in Market Psychology
▪️Yet, beneath this calm surface lies a subtle shift in how markets interpret performance.
▪️The Q1FY26 season offered a glimpse into this evolving mindset — one where investors reacted less to the numbers and more to the narrative.
▪️Earnings surprises, once the sole trigger for price action, now share the stage with management tone and forwardlooking guidance.
▪️Companies that offered reassurance — clarity of vision, discipline in execution, and conviction about the road ahead — often saw their stocks rewarded, even when their profit numbers fell short of estimates.
▪️Conversely, firms that delivered strong results but remained cautious in commentary witnessed muted reactions. 

A telling illustration was Zomato’s performance last quarter. Despite a decline in profits, the stock rallied sharply — not because of what the earnings showed, but because of what the management conveyed. 

Optimism around improving unit economics, expanding delivery footprints, and sustaining growth momentum carried more weight than the headline miss. 

This behaviour underscores a deeper truth: in today’s maturing market, visibility and confidence are becoming as valuable as earnings themselves. 

As India continues its structural upcycle, investors would do well to temper near-term return expectations and focus instead on fundamentals, allocation discipline, and long-term compounding. 

The coming quarters may deliver more of the same — steady growth, selective outperformance, and few fireworks — but that’s precisely what sustains the wealth-creation journey. Short bursts of excitement make for good headlines; sustained profitability makes for better portfolios. And as global economies grapple with volatility, India’s ability to stay the course could well remain its defining edge. 

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