L&T, UltraTech, Bharti Airtel, Maruti Suzuki to Outperform Amid Muted Q3 Earnings Growth: BofA
According to a recent note by BofA’s Amish Shah, L&T, UltraTech, Bharti Airtel, Maruti Suzuki, and Eicher Motors are likely to be strong performers in the Nifty index, despite the expectation of muted Q3 earnings growth. This comes as the broader market is expected to grapple with weak sentiment, with the Nifty likely to post another quarter of subdued earnings growth of around 5% year-on-year.
The drag on earnings growth remains concentrated, with Financials, IT, and Telecom together accounting for nearly 60% of overall earnings growth, highlighting the narrow base of recovery. However, BofA points out that industrials and cement are likely to benefit from execution momentum and operating leverage, while autos will continue to gain from a favorable mix and pricing.
Standout Performers
BofA expects UltraTech Cement, Larsen & Toubro, Bharti Airtel, Maruti Suzuki, and Eicher Motors to be standout performers, with earnings growth expected in the 29-40% YoY range. These stocks are likely to outperform the broader market, driven by their strong operational performance and favorable industry trends.
For instance, UltraTech Cement is expected to benefit from the ongoing demand for cement, driven by the government’s focus on infrastructure development. Similarly, Larsen & Toubro is likely to gain from its diversified portfolio of businesses, including construction, engineering, and manufacturing.
Market Sentiment
Despite the expected strong performance of these stocks, BofA cautions that market sentiment is likely to struggle in the near term, largely due to challenges in Financials and IT, which together command 46% of the Nifty’s weight. The brokerage expects a stable quarter for Telecom, but notes that the risk of further rate cuts and softer deposit growth are key overhangs for banks.
In IT services, easing US rate pressures, improving banking demand, and tariff relief are positives, but unlikely to translate into upbeat near-term commentary. However, Telecom is expected to remain a stable sector, with the potential for a headline mobile tariff hike in the second half of the calendar year 2026, which should support medium-term earnings visibility.
Stock-Level Performance
At the stock level, BofA expects Eternal, Tech Mahindra, Bharti Airtel, Maruti Suzuki, and Mahindra & Mahindra to post strong growth, while SBI, Power Grid, Axis Bank, Reliance Industries, and ICICI Bank are likely to report weaker numbers. The brokerage notes that the Street has already made sharp downgrades to earnings expectations, cutting fiscal 2026 and fiscal 2027 Nifty earnings by 11% and 6% respectively during calendar year 2025.
However, with consensus growth estimates now closer to BofA’s own assumptions, the brokerage expects earnings cuts to moderate. Growth is likely to accelerate into financial year 2027, supported by a pickup in loan growth for Financials, discretionary spending aided by GST cuts, telecom tariff hikes, stronger non-ferrous metals, and a very low base for IT and Staples.
Positioning and Outlook
From a positioning perspective, BofA remains overweight rate-sensitive cyclicals, including Financials, Real Estate, passenger and commercial vehicles, and regulated power utilities. The brokerage also expects the well-off consumption basket to outperform mass consumption, while continuing to prefer defensives such as Telecom and Hospitals.
However, BofA stays underweight on capex plays, citing limited fiscal headroom for both the Centre and states, which is likely to keep government-led capital expenditure growth meaningfully lower in the near term. The brokerage notes that the Indian stock market is likely to remain volatile, driven by global and domestic factors, and advises investors to remain cautious and focused on long-term fundamentals.
