Q3 Results 2026: Small-cap companies emerged as the biggest drivers of India Inc’s profit growth in the December 2025 quarter (Q3FY26), according to a recent report Equirus Securities. According to Equirus, the December-quarter earnings season marked the third consecutive quarter of double-digit profit growth across its coverage universe, the momentum was increasingly being led by small-cap companies.
“The Q3FY26 Earnings Review, reveals that the Equirus Universe of over 250 stocks delivered a third consecutive quarter of double-digit earnings growth. Small cap companies emerged as the standout performers, posting a robust 22% year-on-year (YoY) earnings surge —outpacing their mid-cap and large-cap counterparts and signalling a broadening of India’s corporate earnings recovery,” the report stated.
Across the coverage universe, revenue grew 10% YoY, while EBITDA and PAT rose 14% and 15%, respectively, pointing to improving margins and cost efficiencies. Iy further noted that the faster margin and profits recovery indicates return of pricing power and cost efficiencies realised by India Inc, in a falling interest rate environment.
The brokerage highlighted that Small-caps (142 companies) led with 22% YoY earnings growth, followed by Mid-caps (63 companies) at 15% YoY and Large-caps (57 companies) at 14% YoY. Excluding BFSI, PAT grew 17% YoY, while on an ex-BFSI and ex-OMC basis, Revenue, EBITDA, and PAT each grew 12%, 11%, and 11% YoY respectively.
“The results illustrate a trend we have been observing across Bharat, of entrepreneurship booming outside of the mega metros. More and more firms from tier 2 and tier 3 towns have been tapping the capital markets, as founders look to grow and scale their businesses. A broadening recovery across mid and small caps will help boost employment and lays a strong foundation on the march, to the Viksit Bharat of our dreams,” said Ajay Garg, Managing Director, Equirus group.
Strong earnings upgrades drive momentum
A key highlight of the quarter was the sharp increase in earnings upgrades, reflecting improving visibility across several sectors. Equirus noted that 36% of companies under coverage saw upgrades to their earnings per share during the quarter, driven largely by Auto, Banks & NBFCs, Consumer Durables, FMCG, EMS and IT.
Smallcap companies also dominated the upgrade cycle, aided by expanding demand, better balance sheets and operating leverage.
“Small caps leading the charge with 22% year-on-year earnings growth is a structurally positive signal. It indicates improving execution, healthier balance sheets and expanding market opportunities, which together enhance earnings visibility beyond just a handful of large names,” said Maulik Patel, Director & Head of Research, Equirus Securities.
Consumption, Financials and Technology Drive Momentum
Sectorally, consumption, financials and technology emerged as the strongest contributors to earnings growth. Auto OEMs benefited from festive demand and operating leverage, while two-wheelers are expected to outperform passenger vehicles on the back of rural recovery and replacement demand through FY26–27.
Financial services companies reported stabilising margins and moderating credit costs, with PSU and mid-sized banks showing stronger momentum. Consumer durables also saw improved demand for room air conditioners driven by inventory normalisation and pre-buying ahead of the summer season, while FMCG reported gradual demand stabilisation with improving volume-led growth. Meanwhile, IT services posted modest constant-currency growth supported by productivity gains.
“The combination of domestic consumption recovery, rural demand revival and government-led capex continues to support our constructive view on Indian equities, particularly for small and mid-sized companies that are better positioned to capture incremental growth,” Patel said.
Looking ahead, Equirus flagged several monitorables for 4QFY26, including infrastructure order awards, summer demand trends, global developments impacting IT and healthcare, and RBI rate decisions that could influence BFSI margins.
Patel added that while sector-specific headwinds remain, overall earnings momentum is intact, and the earnings upgrade cycle suggests a recovery that is becoming broader and more durable.
Investment Outlook
With earnings upgrades outpacing downgrades and small caps leading growth, the outlook for Indian equities remains constructive. The Equirus Securities report highlights that earnings visibility across key sectors, coupled with stable macroeconomic indicators, supports a positive medium-term growth trajectory for corporate India.
Investors may continue to monitor sector-specific opportunities emerging from consumption recovery, financial sector expansion, and technology-led transformation trends shaping India’s growth story, suggested the brokerage.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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