Behind strong Q2 show, a shallow recovery

India Inc’s September-quarter print was shaped by small- and mid-cap outperformance, and sector-specific boosts for oil marketing companies, cement and consumption niches rather than a broad-based demand upturn.

- Abhinaba Saha

A benign statistical base and strong non-core income turned healthy operational growth into the strongest net-profit results in nine quarters, Mint’s analysis showed.

An analysis of 3,906 listed companies that had reported earnings as of 19 November revealed that India Inc’s aggregate total income rose 7.5% year-on-year in the September quarter. This was the strongest revenue print in four quarters, while net profit jumped 34%, the highest since the second quarter of fiscal year 2024 (Q2 FY24).

Meanwhile, operational revenue grew 6.5% year-on-year and 2% sequentially. The year-on-year print is the strongest in the past five quarters and sits slightly above the nine-quarter median of 6.4%. In other words, India Inc's strong performance in Q2 FY26 involved only a modest uptick in sales volumes.

By contrast, other income surged almost 50% year-on-year and 36% from the previous quarter. This was the largest non-core income print in nine quarters and added disproportionate heft to total income and profitability in Q2.

However, Nuvama Institutional Equities noted that only cement, chemicals and automobiles saw meaningful margin gains, raising the risk that India Inc’s profit margins may have topped out in Q2.

The September quarter saw the first signs of margin pressure across industrials, consumption and service sectors, signalling profit normalisation from here on, said Ajit Mishra, senior vice president of research at Religare Broking.