Q3 review: Largecaps resilient; 40% smallcaps miss estimates, says JM Fin

Q3 review: For FY26E, JM Financial expects the bulk of earnings support to come from oil & gas, metals & mining, telecom and NBFC

Q3 review: Largecap earnings delivered a resilient quarter in Q3FY26, while the share of misses remained the highest in smallcaps, highlighting a widening divergence in earnings delivery across market capitalisation buckets, according to JM Financial Institutional Securities. 

 

The brokerage noted that 40 per cent of smallcap companies missed expectations, compared with 28 per cent in midcaps and 25 per cent in largecaps. Within the Nifty50 universe of the brokerage, 28 per cent of companies missed estimates, 34 per cent beat estimates, and the rest were broadly in line.

 

Meanwhile, overall Nifty50 earnings per share (EPS) rose 13.4 per cent year-on-year (Y-o-Y) in Q3FY26, against the expectations of 10.1 per cent, while ex-financials EPS jumped 21 per cent Y-o-Y, compared to an expected 16.9 per cent, noted the brokerage.

 

Nifty EPS trajectory improves in Q3; Q4 ask rate modest

After EPS growth of 9.5 per cent Y-o-Y in Q1FY26 and 8.4 per cent Y-o-Y in Q2FY26, Nifty50 earnings momentum improved in Q3, believes JM Financial. With 9MFY26 Nifty50 EPS up 9 per cent Y-o-Y, the implied “ask rate” for Q4FY26 is 4.6 per cent, indicating the bar for Q4 is relatively modest.

FY26/FY27 estimates tweaked marginally post results

Following the Q3 results season, the brokerage said its Nifty50 EPS estimate was cut marginally by 0.1 per cent for FY26E and raised by 0.2 per cent for FY27E. As a result, Nifty50 EPS growth is now pegged at 7 per cent for FY26E (earlier 7.1 per cent) and 15.7 per cent for FY27E (earlier 15.5 per cent),

Sectoral picture

In Q3, the strongest Y-o-Y EPS growth came from metals and mining (up 395 per cent), internet (up 73 per cent), and telecom ( up 65 per cent), alongside consumer retail (up 40 per cent), cement (up 32 per cent), and automobiles (up 29 per cent).  

The worst-performing sector was the non-banking financial company (NBFC), with EPS down 15.3 per cent Y-o-Y. On a beat/miss basis within Nifty50, metals and mining, state-owned enterprise (SOE) banks, cement and utilities stood out on the upside, while aviation, industrials, NBFC, ports & logistics and insurance were among the key misses.

Who does the heavy lifting in FY26?

For FY26E, JM Financial expects the bulk of earnings support to come from oil & gas, metals & mining, telecom and NBFC, while identifying private sector banks (low growth due to their large profit weight), along with automobiles and parts of consumer, as potential drags on the index’s FY26 EPS growth.

 

Overall, the earnings season suggests largecaps are delivering more consistently than smaller names, while the market’s near-term index earnings trajectory hinges on whether heavyweight sectors can sustain the expected contribution into FY26 and FY27.

 

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