Auto, Banks & NBFCs, Consumer Durables, FMCG, EMS, and IT lead earnings upgrades
Mumbai, February 23, 2026 — India Inc.’s earnings momentum remained resilient in the third quarter of FY25-26, with small-cap companies emerging as the strongest contributors to earnings growth, according to a report analysing the third quarter performance of listed companies by Mid-market specialist financial services group Equirus. In the report Equirus Securities one of the top institutional equity brokerages in India highlights broad-based earnings upgrades, steady operational performance, and improving sectoral outlooks across key segments of the economy.
The 3QFY26 Earnings Review, reveals that the Equirus Universe of over 250 stocks delivered a third consecutive quarter of double-digit earnings growth. Small cap companies emerged as the standout performers, posting a robust 22% year-on-year (YoY) earnings surge — outpacing their mid-cap and large-cap counterparts and signalling a broadening of India’s corporate earnings recovery.
Strong Earnings Upgrades Drive Momentum
Approximately 36% of companies under coverage witnessed earnings per share (EPS) upgrades during the quarter, reflecting improving business fundamentals and demand resilience across multiple industries. Sectors driving those upgrades include Auto, Banks & NBFCs, Consumer Durables, FMCG, Electronic Manufacturing Services (EMS), and IT. Earnings downgrades were concentrated in Building Materials, Cement, Infrastructure, Chemicals, Realty, and Retail. The trend indicates growing investor confidence and improving forward earnings visibility across market capitalisation segments.
Small-cap companies led the earnings surge, benefiting from operating leverage, expanding demand, and sector-specific tailwinds. The Equirus Securities report underscores that small caps continue to outperform larger peers in earnings growth terms, supported by improving balance sheets and expanding market opportunities.
Across the Equirus coverage universe of 262 companies, revenue grew 10% YoY, while EBITDA and PAT each rose even faster at 14% and 15% respectively — both ahead of market expectations. The faster margin and profits recovery indicates return of pricing power and cost efficiencies realised by India Inc, in a falling interest rate environment.
Small Caps (142 companies) led with 22% YoY earnings growth, followed by Mid-Caps (63 companies) at 15% YoY and Large Caps (57 companies) at 14% YoY. Excluding BFSI, PAT grew 17% YoY, while on an ex-BFSI and ex-OMC basis, Revenue, EBITDA, and PAT each grew 12%, 11%, and 11% YoY respectively.
“The results illustrate a trend we have been observing across Bharat, of entrepreneurship booming outside of the mega metros. More and more firms from tier 2 and tier 3 towns have been tapping the capital markets, as founders look to grow and scale their businesses. A broadening recovery across mid and small caps will help boost employment and lays a strong foundation on the march, to the Viksit Bharat of our dreams,” said Ajay Garg, Managing Director, Equirus group.
Sectoral Leaders: Consumption, Financials and Technology
Auto, Banks & NBFCs, Consumer Durables, FMCG, EMS, and IT reported strong operational metrics, demand visibility, and margin stability.
Financial services companies demonstrated steady asset quality trends and loan growth momentum, while consumption-linked sectors benefited from improving discretionary spending patterns.
EMS and IT companies saw sustained deal momentum and execution strength supporting earnings outlooks. EMS diversified export-led players outperformed on strong execution, localisation benefits, and healthy order books. IT Services posted modest constant currency growth with margin improvement from productivity gains, while deal wins remained healthy.
Auto OEMs benefited from GST cuts and festive season demand, with operating leverage offsetting raw material pressure. Two-wheelers are expected to outperform passenger vehicles on the back of rural recovery and replacement demand through FY26–27.
Banks reported stabilised margins and moderating credit costs, with stronger momentum in PSU and mid-sized banks, while asset quality improved across the sector. NBFCs saw sharp disbursement rebounds with improving asset quality and positive liability repricing.
Consumer Durables saw improved RAC demand driven by inventory normalisation and pre-buying ahead of summer. FMCG reported gradual demand stabilisation with improving volume-led growth and steady margins, with alcobev outperforming on premium-led growth.
Wires & Cables too remained robust on infrastructure tailwinds.
“The 3QFY26 results reinforce a broadening earnings recovery across India’s corporate landscape. Small caps leading the charge — with 22% YoY earnings growth — is a structurally positive signal. The combination of domestic consumption recovery, rural demand revival, and government capex supports our constructive view on Indian equities heading into FY27.”
— Maulik Patel, Director & Head of Research, Equirus Securities
Earnings Performance in Line with Expectations
Overall earnings performance for the quarter remained largely in line with expectations, signalling stability in corporate profitability despite global uncertainties. Margin trends were supported by cost efficiencies, pricing discipline, and operational optimisation across sectors.
The Equirus Securities report notes that earnings growth continues to be supported by structural drivers including domestic demand resilience, capex momentum, and sector-specific growth catalysts.
Outlook: What to Watch in 4QFY26
“Looking into 4QFY26, key monitorables include the pace of NHAI order awards for construction companies, the summer season demand cycle for consumer durables, US market dynamics and gRevlimid contributions for healthcare names, and RBI rate decisions that could influence BFSI NIM trajectories,” said Patel. “Price hikes and demand momentum in Cement offer near-term support, though new capacity additions may pressure utilisation rates. Logistics remains supported by EXIM recovery and DFC connectivity improvements,” he added.
Investment Outlook
With earnings upgrades outpacing downgrades and small caps leading growth, the outlook for Indian equities remains constructive. The Equirus Securities report highlights that earnings visibility across key sectors, coupled with stable macroeconomic indicators, supports a positive medium-term growth trajectory for corporate India.
Investors may continue to monitor sector-specific opportunities emerging from consumption recovery, financial sector expansion, and technology-led transformation trends shaping India’s growth story.
About Equirus Group
Equirus Group is a leading full-service financial services firm specializing in investment banking, institutional securities, wealth and asset management, HNI broking, and insurance solutions. With a “client always first” approach and a proven track record of delivering value creation, Equirus has built impeccable credentials across domains and sectors. Equirus has completed more than 315+ transactions across M&A, PE, IPOs, QIPs, Rights Issues, and Structured Finance, raising USD 15 billion in the process across sectors over the last 18 years, and has created a differentiation for itself through its ability to structure and deliver transactions in line with the client’s requirements.
Equirus group founded by veteran investment banker Ajay Garg is backed by marquee investors including the late Rakesh Jhunjhunwala, Amicus Capital and Federal Bank. As a professional driven meritocratic group, employees hold a significant chunk of the group’s equity.
Disclosures:
Equirus Securities Private Limited is a SEBI Registered Research Analyst (Reg. No. INH000001154). This is a brief note and not an investment advice. The Research Analyst and its associates have no financial interest, positions, or compensation arrangements with the securities/sector covered, unless stated otherwise in detailed report. Investments are subject to market risk and past performance is not indicative of future results. Detailed disclosures are available in the sector coverage report dated February 20, 2026.
