Signs of maturity

Summary: India Inc has delivered healthy profit growth in FY26 so far, with broad participation across market caps. However, margin compression and slowing quarterly momentum suggest the earnings cycle is maturing, making sector and stock selection increasingly critical. Every earnings season tempts investors into making a binary judgement: strong or weak, accelerating or slowing, buy or beware. Nine months into FY26, corporate India does not fit neatly into either camp. On the surface, the numbers are reassuring. Aggregate profit of the top 1,000 companies is up 14 per cent yearly for the nine months ending December 2025. The median company has grown profits by around 12 per cent. Even after excluding the top 10 contributors, average profit growth stands at almost 16 per cent. This is not an earnings story driven by a handful of heavyweights. Breadth exists. Yet, the trajectory over the year tells a more nuanced story. Profit growth in Q1 was around 17 per cent year-on-year. In Q3, this slowed to nearly 10 per cent and sequentially, barely half the companies reported any growth whatsoever. The cycle is not breaking, but clearly cooling. One must also acknowledge the impact of the new labour code in Q3. For many companies, this meant a one-time accounting adjustment and an immediate compression in margins and profits. Q3 was, therefore, a noisy qu

This article was originally published on March 01, 2026.