Good days for markets ahead? Here's what Nithin Kamath says on Q2 earnings recovery

Zerodha co-founder Nithin Kamath believes things are finally starting to improve for Indian equities, pointing to a recovery in corporate earnings that began even before the stock market staged its sharp comeback in recent weeks.

"Btw, it looks like things are starting to get better. Even before the markets recovered, the earnings had recovered. Good rebound in the sales and profitability across the listed universe," Kamath said in a post on X.

His observation comes as India's September-quarter earnings season has delivered stronger-than-expected results, with several brokerages reporting an improvement in sales, operating profits and net earnings after an extended period of sluggish corporate performance.


The recovery in earnings has coincided with a sharp turnaround on Dalal Street. The Nifty has gained more than 10% in November, supported by renewed foreign institutional buying, falling crude oil prices and improving investor sentiment.

According to an interim earnings review by Motilal Oswal, 230 companies under its coverage reported combined sales growth of 26%, EBITDA growth of 24% and profit after tax growth of 33% year-on-year. The profit growth was the strongest in 12 quarters, exceeding the brokerage's expectation of 19%.

Even excluding oil marketing companies, earnings grew 30%, reflecting stronger profitability across several sectors. Financial services, metals and oil and gas were the biggest contributors, accounting for 78% of the incremental earnings growth in the brokerage's coverage universe.

Among the 35 Nifty companies that had announced their results by October 31, aggregate profits increased 22% year-on-year, led by Reliance Industries, JSW Steel, ICICI Bank, Coal India and Axis Bank.

The numbers lend support to Kamath's observation that corporate earnings had begun improving before investors returned to the stock market.

Other brokerages have also reported encouraging trends. Jefferies found that 56% of the 105 companies under its coverage that had reported September-quarter results exceeded earnings expectations, compared with 52% in the preceding quarter.

The brokerage upgraded FY27 earnings estimates for 50% of those companies, while 41% faced downgrades and 9% remained unchanged.

Jefferies also raised its FY27 earnings growth forecast for the MSCI India index by one percentage point to 15%. Meanwhile, Nomura's review of 134 companies found normalised profit after tax growth of 34% year-on-year, beating consensus expectations by 18%.

Excluding oil and gas companies, profit growth stood at 29%, indicating that the recovery extended beyond commodity-linked businesses. Banks, two-wheelers, power utilities, infrastructure, metals and pharmaceutical companies were among the stronger performers during the quarter.

However, consumer staples, passenger vehicles and chemicals delivered mixed results, suggesting that the earnings recovery remains uneven.

Foreign investors return as earnings improve
The improvement in earnings has come at a time when overseas investors are returning to Indian equities after months of heavy selling. Foreign institutional investors had withdrawn substantial funds from Indian markets during 2026, amid concerns over high crude oil prices, geopolitical uncertainty and expensive valuations.

However, falling oil prices, a weaker dollar and a global shift away from crowded artificial intelligence investments have encouraged fresh buying in Indian stocks.

Citi and HSBC have also turned more positive on the Indian market. Citi recently raised its Nifty target for the end of 2027 to 28,000, while HSBC upgraded Indian equities to overweight, citing resilient earnings and improving economic conditions.

Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and his ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclosures here.