Commodities Power Earnings as Midcap Stocks Steal The Show in H1FY26, What’s Next For Nifty And Sensex?

Midcap stocks outperformed all other segments with a stellar rally in the first half of FY2025-26, while commodity-driven sectors stole the spotlight with robust earnings growth.

Companies in the Oil and Gas, Capital Goods, Metals, and Technology sectors together accounted for nearly 85% of the year-on-year profit growth, with Oil and Gas profits surging 79% on an annual basis, according to a report by Motilal Oswal, released on Monday, November 3.

India's September quarter result season portrayed a balanced picture of healthy growth, as the overall number of earnings upgrade outnumbered downgrades by Motilal Oswal for the first time in several quarters. While midcap stocks continued to perform well, smallcap stocks struggled in earnings.

Midcap Stocks Power The Rally

Midcap Stocks posted around 26% year-on-year growths compared to Motilal OSwal's estimate of 19%. With this, the certain category of stocks continue to outperform for the third consecutive quarter.

The strong performance in midcap sector stocks was led by companies in the technology, cement, metals, PSU Banks, Real Estate, and NBFC categories.

"Within our MOFSL Universe, large-caps (49 companies) posted an earnings growth of 13% YoY - similar to the overall universe. Mid-caps (47 companies) have extended theirstreak of the past three quarters and yet again delivered the highest growth at 26% YoY (vs. our est. of 19%)," stated MOSL in its report.

Commodity Sector Stocks Outshine

Stocks representing companies in the Oil & Gas, cement, capital goods, metals, and technologies segment showcased healthy performance in the first half of FY26 and even during Q2FY26.

"Oil & Gas, Cement, Capital Goods, Metals, and Technology accounted for over 85% of incremental YoY profit accretion, with Oil & Gas profits soaring 79% YoY," noted Motilal Oswal in its report.

What's Next For Nifty, Sensex?

Despite the lacklusture performance of companies over the past two to three quarterly earnings season, Nifty and Sensex have continued to perform and continue to remain in a healthy state.

The brokerage has upgraded its stance on companies like Tata Steel, HDFC Bank, Ultratech Cement, Dr Reddy's Labs, and Shriram Finance.

"The Nifty EPS for FY26E was raised marginally to INR1,101 (from INR1,096) due to upgrades in HDFC Bank, Tata Steel, Ultratech Cement, Dr. Reddy's Labs, and Shriram Finance. The FY27E EPS was raised by 0.3% to INR1,278 (from INR1,274)," noted Motilal Oswal in its report.

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