India Inc earnings recovery playing out as expected. 35 stocks to buy after Q3 results

India Inc's December quarter earnings season has largely met expectations, and brokerages are turning constructive on select pockets of the market. Post the quarterly results, Investors have 35 stocks to choose if they wish to buy, which brokerages have highlighted either due to strong earnings momentum or a likely turnaround in the near term.

The tone of the earnings season has been better, which was expected after the second quarter, where most analysts predicted a recovery. According to Motilal Oswal, 34% of companies in its coverage universe beat estimates at the profit level, while 32% missed, leaving the overall beat-miss ratio broadly balanced. More importantly, the pace of earnings downgrades has slowed.

"The 3QFY26 earnings season reaffirms our analysis that the aggregate earnings revision trajectory has become more palatable," the brokerage said. It pointed out that after a period of earnings cuts in early FY26, upgrades began in Q2 and were further supported in Q3. The MOFSL universe posted 16% year-on-year profit growth in the quarter, slightly ahead of its 14% estimate.

The brokerage expects Nifty earnings to grow about 12% annually over FY25-27. It also noted that valuations at around 20.4 times one-year forward earnings are marginally below the long-period average, suggesting limited downside if earnings hold.

Axis Securities echoed a similar view, especially for financials. It maintained "BUY" ratings on a range of banks and NBFCs after Q3, saying credit growth remains steady and asset quality trends are manageable.

Motilal Oswal's top ideas

Motilal Oswal's preferred largecap ideas include Bharti Airtel, State Bank of India, ICICI Bank, Larsen & Toubro, Infosys, Mahindra & Mahindra, Titan Company, Bharat Electronics, Tata Steel and InterGlobe Aviation.

In financials, State Bank of India and ICICI Bank remain key picks. SBI is trading at about 12 times FY26 estimated earnings, with return on equity expected around 16-18% over FY26-28. ICICI Bank, which has delivered consistent asset quality improvement, trades at about 20 times FY26 earnings, with stable margins and return ratios.

In capital goods, Larsen & Toubro stands out as a proxy for India's capex cycle. The brokerage expects earnings to grow at a healthy pace over FY25-27, supported by a strong order book and execution visibility.

In telecom, Bharti Airtel remains a preferred play. Motilal Oswal is positive on tariff hikes, rising data consumption and improving balance sheet metrics. The stock trades at around 31 times FY27 earnings, with return ratios expected to improve steadily.

In autos, Mahindra & Mahindra is backed by strong SUV demand and farm equipment recovery. The brokerage sees earnings compounding at over 20% over the next two years.

In technology, Infosys is part of the top ideas list despite near-term uncertainty in IT services. Motilal Oswal remains overweight on the sector, though it flagged that "ongoing disruptions in IT services remain a key monitorable in the near term."

Among non-Nifty names, the brokerage likes TVS Motor, Indian Hotels, AU Small Finance Bank, Dixon Technologies, Suzlon Energy, Coforge, Radico Khaitan, Delhivery and V-Mart Retail.

Dixon Technologies is a preferred play on electronics manufacturing services, with earnings expected to grow sharply over FY25-27. Suzlon Energy is seen benefiting from renewable energy momentum, while Coforge offers growth in niche IT services segments.

The brokerage expects mid and smallcaps to deliver stronger earnings growth in FY27 compared to large-caps, but it cautioned that broader market valuations remain stretched.

Axis Securities' top conviction ideas

Axis Securities is more focused on financials and select IT and telecom names. In BFSI, it has "BUY" ratings on Kotak Mahindra Bank, State Bank of India, Federal Bank, City Union Bank, Ujjivan Small Finance Bank, Bajaj Finance and Shriram Finance.

Axis said it prefers lenders with strong liability franchises and improving return ratios. For example, it has a target price of Rs 1,280 on SBI and Rs 1,150 on Bajaj Finance. The brokerage believes retail loan growth and stable credit costs should support earnings over the next few quarters.

On Kotak Mahindra Bank, it remains constructive on long-term growth, even as near-term loan growth has moderated. In the IT and telecom space, Axis highlighted HCL Tech, Coforge, Persistent Systems, Tech Mahindra and Bharti Airtel as preferred names. It believes that despite concerns over AI-led disruption, large IT firms with strong client relationships and execution capabilities remain well placed.

The broader outlook, according to Motilal Oswal, is that Financials, Metals and Automobiles will be key earnings drivers in FY27, potentially contributing nearly two-thirds of incremental profit growth. It also noted that decisive policy steps and improving global trade visibility could help foreign investor flows stabilise.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)