May 2026: Quarterly corporate results show an encouraging trend

As is customary, in this newsletter we look at the performance of the Indian corporate sector by studying the quarterly results for the quarter ending 31 March 2026 for the non-financials in the BSE-500 index, both the total and the total after excluding the volatile Energy sector. 420 of the 428 BSE-500 non-financials have reported so far and we have comparable numbers for 16 quarters for 348 companies, and these 348 represent 91% of the market capitalization of the BSE-500 non-financials. The results are presented below:

As we can see, there is a significant increase in the revenue growth in the selected sample of companies (ex-Energy)  over the last 3 quarters. Revenue growth, which was hovering in the 6-8% p.a. range from June 2023 to June 2025, was 10.3% in the September 2025 quarter, 11.3% in the December 2025 quarter and significantly higher at 14.6% in the March 2026 quarter. At the same time EBIT growth, which was subdued for a while, has rebounded at 11.8% in the March 2026 quarter. Interglobe Aviation (Indigo Airlines) reported a large loss in the March 2026 quarter – if we exclude that from the calculation, the EBIT growth would be a strong 13.9%. When we look at the segmental distribution of the revenue and profit growth, we find that it is quite evenly spread out with a number of sectors reporting growth in the teens.

The above data suggests that the significant stimulus introduced by the government (lower income taxes for sub 12 lakhs income, lower GST) and the RBI (lower repo rates and lower CRR) have had the desired impact on corporate growth which is showing signs of revival after a long dry spell. While the negative impact from the Iran war, is not showing up in the March quarter results yet, we will wait to see how the numbers pan out over the next few quarters, to draw a better conclusion on that.

It is now 3 months since the Iran war started and it has had a dramatic impact on the price of oil and the availability of gas and urea. Urea is also a particular area of concern as Asia has now entered the planting season for crops. There has been an uneasy ceasefire since April 8 with negotiations going on for the last 7 weeks which are yet to yield any result so far. Trump has said recently that the deal is quite close but there remains an uncertainty around the talks. The fact that Brent crude oil is trading in the early nineties suggests that the blockade in the Strait of Hormuz is not complete and some ships are going through.

Even if the war were to stop now and the Strait of Hormuz were to be opened tomorrow, it is likely that oil prices may rise from their pre-war level of $65-70 a barrel to a level closer to $85-95 because of the severe destruction that has taken place to the oil infrastructure of different nations during the war. It is likely that for oil supply from the Middle East to return to pre-war levels, could take considerable time stretching to 1-2 years. So, it would be good for investors to factor some increase in oil prices and its downstream impact on inflation over the medium term.

To some extent Indian consumers have not faced a steep increase in prices at the pump (7.8% increase) which is much less than what consumers in other countries are having to bear. The reason for this is that in India prices were increased at the time of the Ukraine war when oil was close to $100, but they were not brought down when global oil prices fell. So, to that extent the incremental pain for consumers is less from the Iran war. Gas shortage remains an issue and though retail consumers are getting their gas promptly on booking, gas supply is curtailed to commercial and industrial consumers. This would have an impact on restaurants and some manufacturers, particularly in the MSME sector.

It is difficult to say how much impact the Iran war will have on the corporate results in the current financial year, but we suspect that the damage will be limited to a few sectors rather than be negative for all companies. The lower impact on the consumer should also not have a serious inflationary impact. So, if some sort of a deal is signed between US and Iran soon, we may not lose the momentum that we are gathering in Indian corporate results over the last 3 quarters. While the Iran war situation is likely to have some indirect negative impact on many sectors of the economy, we don’t own any stocks in our portfolio which have a direct exposure to oil or gas or other sectors which are likely to be affected by the Iran war.

As we have been saying for the last few months, valuations of the market and particularly the high-quality stocks that we track, have come down to low levels. This has opened up many new opportunities for us in terms of stocks to buy. With results for the companies we own, also showing an encouraging trend, we feel quite comfortable with our holdings over the medium to long term.