Key Highlights

• Large‑cap earnings rose 6 % YoY, mid‑caps +2 %, small‑caps plunged 16%, reflecting clear investor flight‑to‑quality.
• EBITDA grew 5 %, earnings 4 %, with standout sectors: retail, pharma, capital goods; laggards: FMCG, IT, auto.

Equirus Securities' quarterly market report highlighted the strong performance of largecap companies during the fourth quarter of fiscal year 2024-25 (Q4FY25), with earnings and earnings before interest, tax, depreciation, and amortization (Ebitda) figures exceeding expectations across the board.

The brokerage's analysis of 270 stocks found a significant difference between large, mid, and small-cap segments, highlighting investor preference for more established entities in a volatile economic environment.

While the prevailing narratives have focused on earnings downgrades, Equirus Securities countered with data showing Ebitda and earnings exceeding expectations by 4% and 5%, respectively. Year on year (Y-o-Y), Ebitda increased by 6%, while earnings rose by 4%. Revenue growth remained broadly consistent with expectations, with a 5% year-over-year increase.

The breakdown by market capitalisation highlighted the disparity in performance. Among the 270 companies studied, large-cap firms (54) experienced a strong 6% year-on-year earnings growth. Mid-caps (68 firms) saw a modest 2% increase, while small-caps (148 firms) saw a sharp 16% drop in earnings. The stark contrast, analysts said, indicates a continued 'flight to quality,' with market participants favoring well-established players who offer greater stability and resilience in uncertain times.

When examined sectorally, the Equirus Securities Universe—excluding Oil Marketing Companies (OMCs)—showed EBITDA and earnings growth of 5% and 3%, respectively. Excluding the BFSI (Banking, Financial Services, and Insurance) sector, the performance was even stronger, with Ebitda increasing by 7% and earnings by 6% year on year. Retail, pharmaceuticals, capital goods, and consumer durables all experienced strong operating profit growth. On the other hand, the FMCG, Infrastructure, IT, and Auto sectors performed relatively poorly.

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The Internet was the best-performing sector in Q4FY25, growing by 48% in revenue and 37% in profit after tax (PAT). Chemicals followed, with a 10% increase in revenue and a 46% increase in profit after tax. Consumer Durables also posted strong results, with revenue and PAT growth of 19% and 31%, respectively. Other sectors, such as healthcare, cement, auto ancillaries, and automobiles, experienced moderate to strong growth, demonstrating sectoral momentum beyond the largecaps.

In contrast, sectors such as building materials, consumer staples, and industrials lagged behind. Building Materials saw a 6% increase in revenue but an 18% decrease in PAT. Consumer Staples' revenue increased by 6% but saw a 7% drop in profits, while Industrials saw little earnings improvement despite a 6% revenue increase.

On the earnings guidance front, approximately 28% of companies increased their FY26 earnings per share (EPS) estimates. According to analysts, the optimism was largely fueled by industries like capital markets, chemicals, defense, metals, and textiles. The FMCG, building materials, and consumer durables sectors, on the other hand, saw EPS downgrades, suggesting possible demand-side or structural issues.

Consequently, the brokerage ended on a cautiously positive note. Initiatives like cost reduction, product innovation, and geographic expansion are anticipated to assist businesses in maintaining or boosting profitability, even though a number of industries may experience pressures on input costs and price volatility.