Lending financials (Weak) (Revenue/PAT growth (YoY): 3%/0% and (QoQ): 0%/1%)

  • As liquidity issue for the system got resolved and deposit growth improved for banks, gradually rising asset quality concerns  amid moderating credit growth grabbed spotlight. NIM compression led by repo cuts are expected to fully bounce back by Q4FY26 as deposit repricing progressively comes to rescue.  SME credit demand is strong however retail credit is moderating as banks are becoming selective on unsecured loans. Credit cost is normalizing upwards coming off from the low bases.
  • While AUM growth remained healthy for NBFCs, asset quality concerns rose within MSMEs led by weaker macro environment. Cost of funds reduced for most NBFCs as repo cuts got transmitted. Weakness was observed in housing and vehicle finance segments, but gold loan grew strongly due to being high yielding secured asset. . 

Non lending financials (Strong) (Revenue/PAT growth (YoY):9%/36% and (QoQ):-13%/-5%)

  • Healthy high single digit growth in APE for Life insurers with VNB rising at mid teen rate aided by product mix skewed towards protection and non-PAR. For general insurers, investment income drove profitability. Motor TP price rise is expected to help multiline insurers. ADTV growth was strong for brokers/exchanges in this quarter.

Consumer staples (Mixed) (Revenue/PAT growth (YoY): 12%/3% and (QoQ):9%/4%)

  • Staple companies reported YoY revenue growth in mid to high single digits led by low single digit YoY volume growth with sequential improvement. Demand was adversely impacted due to early monsoon for categories such as juices, drinks, skin products and ice creams. Operating margins remained under pressure as prices of agri commodities such as palm oil, coffee, sugar, cocoa, copra  and wheat remained elevated YoY while softened QoQ. H2FY26 is expected to be better led by declining inflation.
  • Various managements highlighted early revival signs for urban consumption aided by softer inflation while rural consumption outpaced urban and drove sector growth.

Consumer discretionary (Mixed) Revenue/PAT growth (YoY): 25%/-17% and (QoQ): 11%/7%)

  • Performance of electrical consumer durables was weak due to early onset of monsoon and delayed summer. Revenue and EBITDA de-grew for most sector players. Channel inventory of RAC was more than usual which will keep exerting pressure on prices to ensure liquidation by festival season. Cable & wires reported healthy volume growth  as demand from all sectors were encouraging. Robust growth reported by EMS players led by efficient execution and strong orderbook build up.
  • Jewellery companies reported strong growth led by festive and wedding season despite elevated gold prices. Healthy performance by retail apparel players. Grocery player faced margin pressure despite revenue growth due to increased competitive intensity. QSR (Ex-JUBI) continues to face headwinds due to soft urban discretional spendings.
  • AlcoBev sector reported strong growth on the back of premiumization trend and opening of Andhra market . Weak show by paint sector due to early onset of Monsoon.

Technology (Weak) (Revenue/PAT growth (YoY): 4%/7% and (QoQ):0%/-1%)

  • Muted performance by IT companies  driven by subdued discretionary spending by clients, delayed ramp up in deals despite strong orderbook amid macro uncertainty exacerbated by tariff scenario. Deals TCVs remained strong led by AI, cost take out and vendor consolidation deals. Midcap companies delivered relatively better growth than their largecap counterparts. Within verticals, manufacturing and retail remained weak for most companies, as clients remained cautious about geopolitical situation.

Industrials and Infrastructure (Mixed) (Revenue/PAT growth (YoY): 9%/19% and (QoQ): -14%/-23%)

  • Muted project awarding by NHAI continued which is leading infra players to diversify away from roads to non-road segments such as railways, solar, power and water.  Execution slowed due to labour unavailability and early onset of monsoon.
  • Power equipment players continued delivering robust execution amid increasing orderbook on the back of ongoing power T&D  capex upcycle. Pricing power and product mix led to mid teen revenue and margins growth. Government’s planned INR 9tn capex on power T&D during FY22-32 paves the way for decadal growth for the sector.

Real Estate (Mixed) (Revenue/PAT growth (YoY): 16%/12% and (QoQ):-21%/-16%)

  • Mixed presales performance for the sector with robust performance by Sobha, DLF and Prestige as approval delays got largely resolved and premium to luxury demand momentum continued. Improved launches, price resilience and low base of FY25 indicate towards a healthy growth in FY26. Office leasing picked up amid declining vacancy as key business districts witnessed mid single digit rental hikes as well. Organized retail consumption segment reported high occupancy but a slowdown in growth.

Automobiles (Weak) (Revenue/PAT growth (YoY): 5%/-4% and (QoQ):-5%/-22%)

  • Continued muted performance by hatchbacks amid SUV dominance. Tractors also grew strongly in double digits. MHCV grew at low single digit rate while LCV was softer.
  • Within ICE 2W segment, industry de-grew marginally and 125CC category outperformed 100CC. South and east markets declined, west flattish, north and central markets grew. Scooterisation and adoption of premium bikes continued to be key trends. EV 2W growth was strong but scarcity of rare earth magnets acts as persistent headwind. Africa as an export market struggled led by Nigeria due to currency concerns, LATAM and Asia firmly on the growth path.

Chemicals (Mixed) (Revenue/PAT growth (YoY): 5%/15% and (QoQ):-7%/-12%)

  • Specialty chemical companies witnessed strong topline revival led by volume growth however pricing pressure continues. Demand for dyes, pigments, ink, pharma and agro intermediates were steady but pricing improvement remained elusive. Rubber chemicals faced China dumping led volume and pricing pressure. FMCG chemicals faced steep input cost pressure leading to subdued earnings growth. While sector is bracing for tariff related uncertainties, long term capex plans continued undeterred.

Cement (Strong) (Revenue/PAT growth (YoY): 14%/59% and (QoQ):-6%/-4%)

  • Better than estimated quarter for the sector as demand revived led by government spending, improvement in real estate sector and a low base. With a better cement pricing in southern and eastern markets, industry saw a mid single digit rise in realisation. Aided with high single digit volume growth and softening raw materials due to inventory adjustments, revenue and EBITDA/ton grew in low double digits at the aggregate level.  A subdued volume growth ahead in Q2 due to it being a seasonally weak quarter.

Energy (Oil & Gas) (Mixed) (Revenue/PAT growth (YoY): 0%/28% and (QoQ):-3%/0%)

  • For OMCs, subdued refining margins were compensated by strong marketing margins resulting into a healthy YoY earnings growth.  For upstream companies, a sharp YoY decline in oil realisation led to a weaker earnings performance despite steady production.
  • Gas transmission volume and pricing were soft due to lower offtake by power and fertilizer plants.  Volume growth reported by city gas company in NCR was softer but the same in MMR region was strong ; input gas costs were softer sequentially for both regions leading to a mixed set of earnings performance by companies. 

Pharmaceuticals (Mixed) (Revenue/PAT growth (YoY): 10%/7% and (QoQ):4%/7%)

  • Domestic formulation businesses grew at low teen rate driven by growth in the chronic portfolios of companies. Muted growth in the US business as increased price erosion was offset by new product launches.

Strong double-digit revenue and earnings growth for the hospitals  as ARPOB grew at high single digit rate led by change in payor mix and no. of beds grew at low double digit rate. Occupancy decreased slightly as supply of incremental beds increased for ensuring future growth.