CLSA's Q3 Earnings Shocker: Stronger than expected results defy market doubts

Global brokerage CLSA has reported a better-than-expected Q3 earnings season, contradicting market scepticism. Despite concerns, nearly 30 per cent of the companies under CLSA’s coverage outperformed estimates, while 46 per cent lagged.

Urban recovery outshines rural slump

For the first time in nine quarters, urban-focused businesses saw profit-before-tax (PBT) growth turn positive, outpacing their rural counterparts. Despite this, Nifty 50's earnings per share (EPS) estimates for FY26 and FY27 were trimmed by around 3 per cent in consensus forecasts, while CLSA made a more modest 2 per cent cut.

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Major stock rating shifts: CLSA’s top picks and drops

CLSA analysts made bold moves, upgrading 18 per cent of stocks for FY26 while downgrading 63 per cent. Among the biggest winners were DLF, Muthoot Finance, and ONGC, which received notable upgrades. On the flip side, Zomato, PVR Inox, and Bandhan Bank saw downgrades due to weaker-than-expected performances.

Key upgrades:

• From Underperform to Hold: Voltas, Tata Steel, Indian Oil, BPCL, Oil India
• From Hold to Outperform: Escorts Kubota, Dalmia Bharat, ACC, Astral, Kaynes Tech, Cholamandalam Finance, Muthoot Finance, Aurobindo Pharma, Dr. Lal Pathlabs, Godrej Properties, TCS, Wipro
• From Underperform to Outperform: Bajaj Auto

Major downgrades:

• Underperform: Gujarat Petronet, Dr. Reddy’s Laboratories

Nifty earnings take a hit despite outperformers

While Nifty 50 posted decent results, it wasn’t enough to prevent downward EPS revisions. Companies like Bharti Airtel, SBI, ICICI Bank, Hindalco, and Reliance Industries were key contributors to earnings growth. However, Coal India, ONGC, Tata Motors, JSW Steel, and IndusInd Bank weighed on overall performance.

Market outlook: Navigating uncertainty

With earnings momentum mixed and broader market correction underway, investors remain cautious. CLSA’s bold calls reflect both optimism in specific stocks and caution in others. As economic conditions evolve, stock selection will be key for investors aiming to navigate this volatile market.