Motilal Oswal’s Nifty-500 review shows broad-based profit recovery — here’s what investors need to know
India’s corporate earnings machine is back in gear.
The Nifty-500 universe — the broadest gauge of Indian listed company performance — delivered profit-after-tax growth of 19% year-on-year in the third quarter of FY26, the strongest quarterly showing in two years, according to Motilal Oswal Financial Services’ latest Morning India research note dated February 23, 2026.
The number that stands out even more: aggregate sales grew 11% year-on-year, the highest in 11 quarters. Revenues are actually accelerating – a far healthier signal for the market.
“Aggregate sales/EBITDA/adj. PAT of Nifty-500 companies grew 11%/12%/19% YoY to approximately INR36 trillion/INR8 trillion/INR4 trillion in 3QFY26,” the Motilal Oswal report states.
Commodities Are Doing the Heavy Lifting
Oil & Gas and Metals were the star performers of the quarter, posting PAT growth of 38% and 34% year-on-year respectively. Together these two sectors contributed roughly 38% of the total incremental earnings growth for the index — a significant concentration, but one the broader market benefited from.
Telecom was the standout sector on a percentage basis with 160% year-on-year profit growth, driven primarily by Bharti Airtel as pricing improvements following tariff hikes last year continued to flow through to the bottom line.
Cement, which had suffered four consecutive quarters of earnings decline, bounced back hard with 46% profit growth. Consumer staples posted their first double-digit earnings growth in seven quarters, rising 13% year-on-year — a signal that household spending is quietly recovering.
GST 2.0 Is a Real Tailwind
The GST rate rationalization announced in September 2025 is now showing up in the numbers. Autos ex-TMPV posted 27% profit growth as festive demand combined with the GST rate cut created a strong demand environment across segments. Life insurance companies saw individual APE jump 22% year-on-year in the quarter, with the GST exemption on protection products acting as a direct demand stimulus.
The One Weak Spot
Technology was the notable laggard narrative, though not a disaster. IT companies posted 12% PAT growth — positive, and the highest in 10 quarters — but management commentary turned cautious after commentary from AI-native companies about productivity compression rattled sentiment. Private banks also disappointed with just 3% profit growth, weighed down by margin pressure and credit cost normalization.
Smallcaps Are Outperforming — By a Wide Margin
This is perhaps the most important takeaway for retail investors and wealth managers.
Smallcap-250 companies recorded 26% PAT growth in the quarter, comfortably ahead of the Nifty-100’s 18% growth. Midcap-150 companies delivered 20%. The gap between large and small caps in earnings momentum is meaningful and is consistent with the broader valuation re-rating that smallcaps have seen over the past two years.
Key Sector Takeaways for Investors
Banking: PSU banks continued to outperform private peers, growing profits 18% against just 3% for private banks. Credit costs remain controlled and loan growth is tracking around 12.5% for FY26. Motilal Oswal’s preferred picks in the space include HDFC Bank, ICICI Bank, and SBI.
Capital Goods: Healthy order inflows from power T&D, defense, and data center infrastructure are sustaining the sector’s earnings trajectory. The brokerage reiterates a positive stance on L&T, Cummins India, and Siemens Energy in large caps, with Bharat Electronics as the top defense pick.
Automobiles: Fleet utilization has risen to nearly 95% for commercial vehicle operators since November 2025, according to an expert channel check in the report, prompting fresh buying decisions. Lower EMIs following rate cuts are also supporting demand.
Life Insurance: MAXLIFE, CANHLIFE, and SBILIFE remain the preferred picks. Protection business momentum is strong, with VNB margins expanding across most players despite the loss of input tax credit post-GST exemption.
Bottom Line
Three things stand out from this quarterly sweep:
Breadth is improving. Eighteen of 22 key sectors posted double-digit profit growth. That’s not a commodity-driven mirage — it’s a broad recovery.
Smallcaps still have earnings momentum. With Smallcap-250 growing profits at 26% versus the large-cap index at 18%, the earnings case for the mid and small-cap space remains intact even after the recent market correction.
The domestic consumption recovery is real but early. Consumer staples’ first double-digit growth in seven quarters is encouraging. If rural demand continues to pick up and interest rates stay accommodative, the consumer space could be a multi-quarter story.
Motilal Oswal sums it up this way in the report: the quarter was marked by “improved sectoral breadth and benefits of GST 2.0 flowing through select sectors,” with roughly half of all Nifty-500 companies — 245 out of 500 — posting earnings growth of over 15% year-on-year.
