A sharp divergence is emerging in the second-quarter corporate earnings season. Projections show that at least 46 companies are on track to report double-digit year-on-year drops in net profit. This weakness persists even as aggregate corporate earnings reflect one of the strongest growth phases in several quarters, underlining unevenness across the corporate landscape.
Data from Motilal Oswal indicates that total earnings for its covered universe are expected to expand by 22% year-on-year, marking the highest rate in 11 quarters. For Nifty index members, net profit growth is projected at 27%, driven largely by banks, non-banking financial companies, metals, oil and gas, and telecom. Outside the benchmark, smallcap profit is forecast to increase by 23%, while midcaps are expected to grow by 11%.
However, multiple key sectors face significant earnings contraction. In the automobile and auto-components space, net profit is projected to drop 19% at Maruti Suzuki, 22% at Hyundai Motor, 24% at MRF, and 69% at CEAT, despite Maruti registering a 27.7% rise in revenue. The cement industry reflects even steeper contractions, with projected net profit declines of 81% at Dalmia Bharat, 74% at ACC, 73% at Ambuja Cements, 72% at Birla Corporation, 66% at JK Lakshmi Cement, and 40% at Shree Cement, even as overall sector revenue expands by 11%.
Pharmaceutical and healthcare companies face notable profit contractions as well. Dr Reddy’s Laboratories is expected to post a 60% drop in net profit, while Cipla, Lupin, Alkem Laboratories, and Zydus Lifesciences are projected to see declines of 35%, 18%, 13%, and 13%, respectively. Meanwhile, in the consumer sector, ITC is expected to see a 15% drop in net profit alongside a 16% fall in EBITDA, with Jyothy Labs and Bikaji Foods projected to experience drops of 48% and 18%.
Earnings drag extends into other major segments, including capital goods, retail, and metals. Projected net profit drops include 47% at Go Fashion, 45% at Blue Star, 30% at Bata India, 12% at Vedanta Aluminium, and 11% at NMDC. Further weakness is expected across companies such as Siemens, KEC International, Triveni Turbine, Indraprastha Gas, Indian Oil Corporation, Suzlon Energy, UPL, Coromandel International, Yatra Online, and Ventive Hospitality.
Analyst commentary ties this selective profit stress to specific internal and macroeconomic factors. Companies face headwinds from operating leverage, product mix variations, input costs, pricing pressures, and mixed rural demand tied to irregular monsoon trends. Market sentiment is further strained by external risks, including global bond yield spikes, capital outflows from emerging markets, foreign institutional selling, and elevated international crude oil prices linked to geopolitical uncertainty.
Going forward, Motilal Oswal notes that investor sentiment and broad equity market direction will depend on five major variables. These include global interest rate tracks, international energy prices, foreign institutional capital flows, the sustainability of artificial intelligence trends, and the volume of primary market equity supply.
Key numbers
- Motilal Oswal coverage profit growth: 22%
- Nifty profit growth forecast: 27%
- Dalmia Bharat profit decline: 81%
- CEAT profit decline: 69%
- Dr Reddy's Laboratories profit decline: 60%
What a board might note
- How are input costs, product mix shift, and pricing pressure affecting company operating leverage, given that Maruti Suzuki faces a 19% profit drop despite a 27.7% revenue gain, and cement revenues are up 11% while Dalmia Bharat profits fall 81%?
- What strategies are in place to address sector-specific earnings divergence, considering Motilal Oswal projects 27% Nifty earnings growth alongside double-digit profit declines at 46 companies?
- How vulnerable is the company's valuation to shifting capital flows, given that global interest rate hikes, elevated crude prices, and foreign institutional selling are squeezing emerging-market equities?
Source: Economic Times, 8 October 2026. This is a summary of a news report, published as general information. It is not legal, tax or investment advice.
This article is journalism and commentary. It is not a recommendation to buy or sell any security, and it is not professional advice. Read the full disclaimer.
