Q3 Earnings Season: Brokerages Divided on Recovery Prospects After Six Quarters of Decline

India's Q3 earnings season stands at a critical juncture, with brokerages forecasting the strongest profit growth in two years while remaining deeply divided on whether this marks genuine recovery or another false dawn. After six consecutive quarters of disappointing results, the Street faces mounting uncertainty over corporate India's ability to deliver sustained earnings momentum.

Brokerage Forecasts Paint Contrasting Pictures

The earnings outlook reveals stark disagreements among leading research houses. Motilal Oswal projects the most optimistic scenario, expecting stocks under its coverage to deliver PAT growth of 16% YoY—the highest in eight quarters. The firm anticipates 20 sectors to post double-digit growth, marking what it calls "the completion of the full circle of earnings recovery."

Emkay Global supports the optimistic view, projecting 14.5% PAT growth driven by festive season demand and GST rate-cut tailwinds. The firm expects the BSE500 to register 14% PAT growth versus 8.5% for the Nifty, signaling broader market strength beyond large-cap indices.

However, Nuvama strikes a cautious note, warning that "Q3FY26E earnings are likely to stay soft—a continuation of the previous six quarters." The brokerage expects Nifty EPS to remain flat YoY, posing downgrade risks to consensus estimates of mid-teens profit growth.

Financials to Anchor Quarter Performance

A rare point of consensus emerges around financials serving as the quarter's anchor. Axis Securities expects banks under its coverage to deliver approximately 12.4% YoY credit growth, in line with industry trends. The firm anticipates steady NIM trends, with margins finding support from CRR cuts and term deposit repricing.

Motilal Oswal forecasts financials led by NBFC-Lending to grow 26% YoY, though it notes that both private banks and PSBs will contribute moderately at 4% and 3% respectively. Asset quality is expected to turn favorable gradually, particularly in unsecured portfolios.

Auto Sector Revs Up on Policy Support

The automobile sector emerges as a standout performer, benefiting from favorable policy measures. Motilal Oswal forecasts automobile growth of 25% YoY, with the quarter capturing the full impact of GST 2.0 cuts implemented on September 22, 2025.

Axis Securities highlights that the auto sector benefits from stable commodity inflation and favorable regulatory norms alongside the GST rate cuts, creating a supportive environment for margin expansion.

Export Sectors Face Persistent Headwinds

Export-oriented sectors continue to struggle with structural challenges. Axis Securities identifies cautious client spending, pricing pressures, and regulatory challenges as key risks for IT services, pharmaceuticals, and chemicals. Certain pharmaceutical segments face additional pressure from pricing challenges and regulatory issues in specific markets.

Nuvama expects profits to remain weak in exporters including chemicals, auto components, and pharma, alongside FMCG and electronics manufacturing services. The firm warns that slowing global trade and margin compression pose ongoing risks to earnings recovery.

Brokerage Stock Recommendations

Leading research houses have identified key stock picks across sectors:

Top Picks by Brokerage:

• JM Financial: Bharti Airtel, ICICI Bank, Maruti Suzuki, Titan, UltraTech Cement
• Motilal Oswal: SBI, Titan, M&M, Infosys, Dixon Technologies
• Morgan Stanley: Maruti Suzuki, Trent, Titan, Varun Beverages, Reliance Industries
• CLSA: ICICI Bank, SBI, Infosys, ITC, UltraTech, NTPC

As earnings season unfolds, the market will closely watch whether the optimists or pessimists prove correct, determining if corporate India can finally deliver the sustained recovery that has remained elusive for six consecutive quarters.