The Q3 FY26 earnings season kicks off next week, and expectations are mixed across sectors. While banking and auto sectors are expected to deliver strong numbers, IT and FMCG face margin headwinds. Here's our comprehensive preview.
Sector-Wise Expectations
- Banking: Net interest margins stable; credit growth at 14-15%; asset quality improving
- IT Services: Modest revenue growth of 2-3% QoQ; margin pressure from wage hikes
- Auto: Strong volume growth in PV segment; two-wheelers recovery continues
- FMCG: Volume growth subdued; rural recovery slower than expected
- Pharma: US generics pricing stable; domestic formulations growing at 8-10%
Banking Sector: The Star Performer
Private banks are expected to report 15-18% PAT growth, led by robust loan growth and stable margins. HDFC Bank and ICICI Bank remain our top picks. PSU banks should also report decent numbers, though the pace of improvement may moderate.
IT: Cautious Optimism
IT majors face near-term headwinds from furloughs and discretionary spending cuts. However, deal pipelines remain healthy, and FY27 guidance will be the key focus. TCS and Infosys should provide insights on client spending trends for the coming year.
Stocks to Watch
- HDFC Bank: Q3 will be the first full quarter post-merger integration
- Reliance Industries: O2C margins and Jio subscriber additions in focus
- Tata Motors: JLR performance and EV transition update
- Bharti Airtel: ARPU trajectory and 5G monetization
- Larsen & Toubro: Order inflows and execution commentary
Market Implications
We expect Nifty EPS growth of 10-12% for Q3. Markets have already priced in a decent quarter, so positive surprises will be needed for further re-rating. Stay focused on guidance and management commentary rather than just the numbers.