Q2 scorecard: Nifty 50 companies' profit growth at 12-quarter low

Their sales uptick least in 17 quarters

The slowdown in corporate India’s growth and earnings cycle appears to have weighed more heavily on frontline and largecap companies than on their smaller peers. The combined net profit (adjusted for exceptional gains and losses) of Nifty 50 companies rose just 1.2 per cent in the September 2025 quarter, its weakest expansion in 12 quarters, even as the combined net profit of all listed companies climbed 10.8 per cent year-on-year in Q2FY26, the fastest pace in six quarters.

 

Similarly, Nifty 50 firms reported a 6.4 per cent year-on-year rise in combined net sales (gross interest income for banks and other lenders) in Q2FY26, the smallest increase in 17 quarters. By contrast, net sales for all listed companies expanded 7.2 per cent year-on-year in the same period, improving from 6.64 per cent in Q1FY26 and 7 per cent in Q2FY25.

 

Following their weak performance in Q2FY26, Nifty 50 firms have now lagged the broader corporate sector for four consecutive quarters. In total, the index has underperformed in eight of the past 10 quarters since Q1FY24. This marks a reversal from the five consecutive quarters between March 2022 and March 2023 when Nifty 50 firms outpaced India Inc.  

 

This prolonged underperformance has eroded the Nifty 50’s contribution to nationwide corporate profits. The index’s share of total corporate earnings fell to 50 per cent in Q2FY26, the lowest in at least five years and down sharply from nearly 60 per cent three years ago.

 

The combined net profit of Nifty 50 companies edged up to about ₹1.81 trillion in Q2FY26 from around ₹1.79 trillion a year earlier, but was down 10.4 per cent from ₹2.02 trillion in Q1FY26. As a result, their aggregate earnings in Q2FY26 were the lowest in four quarters.

 

By comparison, the combined net profit of all 2,647 companies in the Business Standard sample rose to ₹3.62 trillion in Q2FY26 from ₹3.27 trillion a year earlier, but declined 3.9 per cent from ₹3.77 trillion in Q1FY26. Overall corporate earnings in Q2FY26 were the weakest in three quarters.

 

Analysts attribute the weak Nifty 50 performance to outperformance by second- and third-tier companies. “The Q2FY26 earnings performance of the Nifty-500 companies was fuelled by mid and smallcap companies. Aggregate earnings of midcap-150 companies grew 27 per cent year-on-year, while smallcap-250 companies recorded a 37 per cent year-on-year growth. In comparison, earnings growth for largecaps (Nifty 100 constituents) stood at 10 per cent year-on-year,” wrote analysts at Motilal Oswal Financial Services in their second-quarter review. 

 

The brokerage linked the relative underperformance of largecaps to the weak showing by private-sector banks and automobile manufacturers.

 

Analysts at Elara Capital said earnings growth remains concentrated among a narrow group of companies in a handful of cyclical sectors. “Overall earnings rebound in Q2FY26 but growth still heavily skewed toward cyclical sectors such as energy, metals, cement, infrastructure materials and discretionary (including autos),” they wrote in their quarterly earnings review. The Nifty 50, they noted, is dominated by banks, IT services, FMCG, oil & gas and automobiles, with only a limited representation from the outperforming cyclical sectors.

 

Elara sees this divergence as a sign of an earnings recovery in coming quarters, led by domestic cyclical sectors and midcap stocks.

 

Other analysts, however, argue that the divergence between largecaps and the broader corporate universe is unlikely to persist. “It’s not that smaller companies are gaining market share from bigger companies. A better show by mid and small companies could be attributed to their low base last year and the cyclical upturn in a few sectors, but it’s not structural. It will even out and overall earnings will start tracking the performance of largecap companies,” said Dhananjay Sinha, co-head of research and equity strategy at Systematix Institutional Equity.

 

According to Sinha, channel checks with wholesalers indicate continued weakness in consumer demand across segments despite recent government tax cuts. This, combined with the recent decline in merchandise exports, is likely to weigh on overall corporate growth and earnings.