Q1 Earnings Review: Why India Inc Surprised—and What Comes Next

Q1 earnings review: India Inc grew ~7% QoQ. Explore insights on IT rebound, midcap strength, banks’ margin squeeze, and sectoral shifts.

Imagine a packed online dashboard: you’re tracking India’s stock market, hoping for strong signals—but things feel murky. That’s exactly how many investors felt heading into the Q1 earnings review. Right from the start, “Q1 earnings review” dominated your thoughts: will growth surprise or disappoint? This blog dives into the real story behind the numbers—clear, relatable, and packed with insight for readers in India’s fast‑moving markets.

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Why the Q1 Numbers Mattered

Several brokerages—including Jefferies and Motilal Oswal—took a deep dive into June‑ending results, offering a nuanced take on what Q1 reveals about the broader economy.

Key takeaways:

• Jefferies upgraded the Nifty IT sector from “Negative” to “Neutral”, despite a 25% drop from its peak. They argued that Q1 earnings weren’t as bad as feared, offering a tactical bounce opportunity thanks to attractive valuations and strong cash flow The Times of India+3The Economic Times+3The Economic Times+3The Economic Times+3NiftyTrader+3The Economic Times+3.
  
• Motilal Oswal confirmed aggregate earnings growth of 7% YoY across 184 covered firms, with Nifty 38 reported companies posting 7.5% growth, beating the 5.7% expectation Business Standard.
  

H3 takeaway: Despite macro‑headwinds, India’s Q1 earnings held steady enough to spark cautious optimism.

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Sectoral Performance—Who Led, Who Dragged?

IT Sector

IT giants like TCS, Infosys, HCL Tech, and Wipro reported single‑digit growth, weighed down by weak discretionary spending, geopolitical uncertainties, and AI disrupting traditional business models The Times of India. Jefferies sees potential for a near‑term bounce if valuations remain attractive businesswire.com+15Business Standard+15The Economic Times+15.

Banks & Financials

• HDFC Bank delivered 12.2% profit growth despite higher provisions; ICICI Bank saw 15.5% growth; both were upgraded by analysts reuters.com+1Business Standard+1.
  
• Motilal Oswal projects banking earnings might bottom out in FY26, with private banks growth at ~11% and PSBs at ~8% Business Standard+15ndtvprofit.com+15The Economic Times+15.
  
• IDFC First Bank surprised with strong “other income” from bond gains, raising FY26 earnings estimates by 11% ndtvprofit.com.
  

Industrial & Cyclicals

• JSW Steel shocked with a 158% surge in net profit (~₹2,184 crore), above estimates, thanks to rising domestic prices and falling input costs; EBITDA margins jumped to ~17.6% reuters.com+1The Economic Times+1.
  
• JSW Energy posted a 42% YoY profit gain, driven by capacity expansion in renewable and thermal units The Economic Times.
  

H3 takeaway: Banks and industrials powered growth; IT lagged but showed tactical upside.

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What Brokerages Say—Jefferies vs Motilal Oswal

Jefferies

• Shifted Nifty IT rating to ‘Neutral’, citing the potential for a valuation-fueled rebound and stable Q1 earnings ndtvprofit.com+3motilaloswal.com+3The Economic Times+3.
  
• Maintains overweight stance on India overall, seeing long-term outperformance relative to other emerging markets The Economic Times+2ndtvprofit.com+2The Economic Times+2.
  

Motilal Oswal

• Trimmed FY26 Nifty EPS to ₹1,110 (down 1.1%) and FY27 to ₹1,297 (down 0.8%) due to earnings cuts for large caps like Reliance, Axis Bank, and HDFC Business Standard+1The Economic Times+1.
  
• Turned bullish on mid-caps, which delivered third consecutive quarter of double-digit growth (~12% YoY vs 7% for large caps). Small caps lagged significantly Business Standard+1The Economic Times+1.
  

H3 takeaway: Jefferies sees stabilization; Motilal Oswal prioritizes midcap resilience over large-cap uncertainty.

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What Happened at the Market Level?

Earnings Season Pulse

Roughly half of BSE 500 companies have reported, revealing subdued performance overall. Analysts argue the “easy money” phase may be over as microeconomic headwinds intensify The Economic Times.

Concentrated Growth Pattern

Among 38 Nifty firms reporting results:

• Growth came from Reliance, Bajaj Finance, L&T, M&M, and a few others
  
• Drag came from Coal India, IndusInd, HCL Tech, Axis Bank, Kotak, and others Business Standard+1ndtvprofit.com+1.
  

Outlook Summary

• 7% earnings growth overall; FY26 EPS estimates trimmed, but not catastrophically.
  
• Dynamic splitting: midcaps holding strong; large caps stagnant; small caps vulnerable.
  

H3 takeaway: Corporate growth is selective; broad resilience masks deeper sectoral imbalances.

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What This Means for Investors & Businesses

For the Individual Investor

• Focus on midcap stocks or large caps with strong operational momentum.
  
• Revisit quality IT companies trading at depressed valuations—any bounce could reward.
  
• Review banks and non-bank finance firms with clean balance sheets and steady NII growth.
  

For Businesses & Management Teams

• IT players must invest in AI-first delivery models and customer consolidation.
  
• Banks need to manage margins amid rate cuts and credit slowed pace.
  
• Industrial caps should rein in input costs and optimize capex.
  

For Policymakers & Strategy Heads

• Reinforce policy clarity amid global trade shocks.
  
• Encourage capex cycles, especially in infrastructure and manufacturing.
  
• Monitor liquidity dynamics as growth expectations cool.
  

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Overall Summary

Segment	Q1 Growth Trend	FY26 Outlook	Key Risks
IT Services	Single-digit decline	Neutral/volatile, tactical bounce	Macro slowdown, AI disruption
Large-Cap Financials	Mid-teens growth in banks	EPS trimmed ~1%	RBI rates, credit slowdown
Midcaps	Strong (~12% YoY)	Continues outperforming	Funding constraints, sector-specific shocks
Industrials (JSW, etc.)	Robust profits (40‑150%)	Stable upward trajectory	Raw material volatility, regulation

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CTA

What’s your Q1 takeaway? Did you pick winners in banking, energy, or midcaps—or did IT’s valuation draw your attention as a contrarian play? Share your thoughts or your own stanza in the earnings story!