Corporate India’s Q2FY26 earnings season showed mid-cap companies and commodity-linked sectors leading profit growth, offsetting weaknesses in select small-caps, a report said on Monday. 

Mid-cap firms outperformed expectations, with 47 companies reporting a 26 per cent year-on-year earnings increase, surpassing the estimated 19 per cent, the report from brokerage Motilal Oswal Financial Services Limited said.

“Earnings upgrades outnumbered downgrades for the first time in several quarters, signalling a healthier market backdrop and improving confidence in India Inc.’s profitability trajectory,” the MOFSL report said.

While headline indices remain range-bound after a muted year, underlying fundamentals are improving — supported by moderating earnings cuts, diversified sectoral leadership, and robust mid-cap resilience, the brokerage said.

The growth in mid-cap space was seen for the third straight quarter, driven by strong performance in technology, cement, metals, state-owned banks, real estate, and non-lending NBFCs.

Commodities drove the majority of profit growth, with oil and gas, cement, capital goods, metals, and technology contributing over 85 per cent of incremental YoY profit, the report noted. Oil and gas profits surged by 79 per cent compared to the previous year.

Large-cap earnings saw a 13 per cent growth, while small caps showed comparatively weak performance with only 3 per cent year-on-year growth, the report said.

The brokerage, however, maintained that 69 per cent of small-cap stocks met or exceeded estimates, but the total results were weighed down by private banks, NBFCs, technology, retail, and media sectors.

In the financial sector, credit growth and improved asset quality buoyed PSU banks, while private banks showed mixed trends.

Order execution and margin improvement supported solid double-digit growth in the capital goods and infrastructure space. Margin stability and cost control led to positive surprises in mid-tier IT and pharma stocks, the brokerage noted.