Midcap, Smallcap Firms to Outpace Large Caps in FY27: Duggad
- 1India's corporate earnings trajectory through FY27 shows midcap companies growing at 17% and smallcaps at 20%, significantly outpacing the 13% growth expected from large caps, according to Motilal Oswal's institutional equities analysis.
- 2While aggregate earnings for 380 tracked companies are projected to decline 3% in the April-June 2026 quarter due to oil marketing company losses, excluding OMCs reveals robust 14% PAT growth with revenue growth hitting a four-year high of 17%.
- 3Within the financial services sector, mid-sized private banks are expected to deliver over 30% earnings growth, while lending NBFCs could see growth exceeding 25%, making them the preferred segment for institutional investors.
- 4The firm maintains a positive outlook on NBFCs, automobiles, telecom and consumer discretionary stocks while remaining cautious on capital goods valuations and underweight on IT, FMCG and commodities.
- 5This earnings divergence between market capitalisation segments, with smallcaps staging a turnaround after prolonged weakness and midcaps outperforming for nine consecutive quarters, signals a fundamental shift in India's corporate growth engines.
OMC losses mask 14% PAT growth across 380 companies; NBFCs, autos, telecom remain investment sweet spots.
India's corporate earnings landscape is undergoing a significant structural shift, with midcap and smallcap companies emerging as the primary growth drivers through FY27, even as state-owned oil marketing companies drag down headline numbers. This divergence between market segments carries important implications for marketing professionals and brand strategists navigating investment priorities and category dynamics.
The Hidden Growth Story Behind Headline Numbers
Gautam Duggad, Managing Director & Head of Sales, Institutional Equities at Motilal Oswal Financial Services, revealed that while aggregate earnings for the 380 companies under the firm's coverage are expected to decline 3% in the April-June 2026 quarter, this headline figure masks robust underlying performance. Strip out the three major oil marketing companies, and profit after tax growth accelerates to 14%. More significantly, revenue growth is projected to reach a four-year high of 17%, buoyed by rising inflation, double-digit nominal GDP expansion, strong GST collections and sustained credit growth. For marketing leaders, this divergence underscores the importance of looking beyond surface-level economic indicators to identify genuine category momentum. The companies actually growing—midcaps at 17% and smallcaps at 20% versus large caps at 13%—represent different consumer touchpoints, distribution strategies and brand positioning opportunities than traditional blue-chip giants.
Financial Services Emerges as Multi-Speed Sector
The financial services landscape is experiencing unprecedented segmentation in growth trajectories. While traditional banks are expected to deliver approximately 10% earnings growth, mid-sized private banks are projected to surge ahead with over 30% growth. Lending NBFCs are forecast to grow earnings by more than 25%, while non-lending NBFCs are expected to clock around 20% growth. This makes NBFCs the preferred segment within financials for institutional investors. For consumer-facing marketers, these growth differentials translate into vastly different marketing budget trajectories across financial services advertisers. Mid-sized private banks and NBFCs—historically smaller spenders compared to large public sector banks—are likely to increase marketing investments substantially as they compete for market share during their high-growth phase. Brand strategists should anticipate more aggressive challenger brand campaigns in the BFSI category, particularly in digital channels where these nimbler players have typically concentrated their marketing firepower.
Sectoral Preferences Signal Category Headwinds and Tailwinds
Motilal Oswal's sectoral stance offers a clear roadmap of where institutional capital is flowing. The firm remains positive on NBFCs, automobiles, telecom and consumer discretionary stocks, while maintaining caution on capital goods valuations and staying underweight on IT, FMCG and commodities. This positioning is particularly striking given the traditional defensive appeal of FMCG stocks to institutional investors. The underweight stance on FMCG and IT—two of India's largest advertising categories—suggests potential pressure on marketing budgets in these sectors as earnings growth disappoints relative to broader market expectations. Conversely, the positive outlook on consumer discretionary and automobiles points to sustained marketing intensity in categories ranging from quick-service restaurants and apparel to passenger vehicles and two-wheelers, where improving consumer sentiment and credit availability are driving purchase decisions.
The Midcap and Smallcap Resurgence
Perhaps most significant for marketing professionals is the sustained outperformance of midcap companies for nine consecutive quarters, coupled with smallcaps staging a turnaround after an extended period of weaker earnings. This structural shift reflects deeper changes in India's economy: the maturation of digital distribution channels that allow smaller companies to scale rapidly, the emergence of category niches that support viable mid-sized players, and improving access to growth capital. For agency leaders and brand consultants, this trend suggests an expanding client universe beyond traditional large-cap advertisers, with midcap and smallcap companies increasingly able to invest in sophisticated brand-building and performance marketing campaigns.
The earnings divergence between market cap segments reflects a fundamental rebalancing of India's corporate ecosystem that marketing professionals must factor into strategic planning. The superior growth rates of midcap and smallcap companies are not merely statistical artefacts of smaller bases; they represent genuine market share gains, category creation and the scaling of digital-first business models that bypass traditional barriers to growth. This has profound implications for media planning, as these emerging players typically allocate marketing budgets very differently from established large caps, favouring performance marketing, influencer partnerships and niche digital platforms over mass-reach traditional media.
The underweight stance on FMCG deserves particular scrutiny from marketing professionals, as it signals institutional scepticism about the sector's ability to pass on input cost inflation while maintaining volume growth—a challenge that manifests as pressure on both gross margins and marketing ROI. Simultaneously, the bullish outlook on consumer discretionary categories suggests that Indian consumers are prioritising aspirational and lifestyle purchases over routine consumption, a behavioural shift that demands corresponding evolution in brand positioning and communication strategies. Marketing leaders must recognise that capital allocation decisions by institutional investors—which sectors receive funding, which companies can invest in growth—directly shape the competitive intensity and innovation velocity within their categories.
The FY27 earnings outlook reveals a two-speed economy where growth is concentrating in midcap and smallcap companies, consumer discretionary categories, and within financial services, particularly NBFCs and mid-sized banks. For marketing professionals, this translates into heightened competitive intensity from challenger brands with expanding budgets in automobiles, telecom and discretionary consumption, while traditional FMCG and IT advertisers may face budget constraints. Brand strategists should anticipate more sophisticated marketing from previously second-tier players, while media planners must adapt to shifting advertiser mix favouring digital-native approaches over conventional mass-media strategies.
This article is an editorial rewrite based on reporting originally published by CNBC TV18. The original article has been rewritten and contextualised for India's marketing community by The Wise Marketing Desk using AI-assisted editorial tools.
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