Q1 FY27 Preview: Oil-sensitive sectors, IT may face margin pressure; banks and autos could surprise positively

In the first quarter of FY27, the benchmark NIFTY50 jumped 6.6%, surpassing the fourth quarter FY2025-26 returns as the index dropped 14% in the period. In the first quarter started with high negative sentiment due to the war in the Middle East, which continued till end of June.

At the sectoral level, the Nifty Realty emerged as the top gainer with 28.4% returns for the quarter ending June 30, 2026, while the Nifty IT index was the top loser with nearly a 12% drop, extending its losses from the Q4 of FY26, where it marked a 23% drop, as per the exchange data.

Experts predict that the first month of the second quarter of the year ended 2026-27, is estimated to be largely driven by the earnings season and their share price reactions post the financial performance release.

Key triggers for upcoming Q1 results season

Elevated energy prices

For energy prices, the first quarter of the current fiscal year was an eventful yet highly volatile quarter in terms of energy rates in the market. The West Asia conflict resulted in a sharp spike in crude oil prices from $70 to $119 per barrel.

The impact of the rising energy price also was visible with inflation spiking above 4% in recent months. However, due to the easing cues in the market, the crude oil prices have now reversed their gains to pre-war level, giving a breather to oil-importing nations like India.

In the upcoming Q1 results, oil-sensitive sectors like FMCG, paints, oil marketing, tyres, aviation, and petrochemicals are expected to show visible changes in their operating margins due to the impact of crude oil prices.

In India, the crude oil basket prices went north of $140 per barrel, suggesting a strong impact on the operating profits of the companies, as the size of the impact is visible to investors.

Ratings agency ICRA, in its latest report, hiked its estimate of net loss for Indian airline operators to the range of ₹36,000-38,000 crore in the current fiscal (FY27), citing higher operating costs arising from the rupee's depreciation and elevated aviation turbine fuel (ATF) prices.

Banking shows resilience

While other sectors face the brunt of higher energy prices and disrupted supply chains, the banking sector shows strong resilience in turbulent times.

The Indian banking sector has maintained strong credit growth and top-notch asset quality at the same time. The Reserve Bank of India (RBI) in its latest data has shown that bank credit to the industrial sector grew 17.5% year-on-year (y-o-y) by the end of May 2026, a sharp increase from 5.3% in the corresponding period last year.

Similarly, the asset quality improved significantly as the gross-non-performing assets (NPAs) for Indian banks hit a multi-decadal low of 1.8%, underlining the top-notch asset quality of the Indian banking sector.

In the upcoming Q1 results, the banking sector is expected to show better profitability, owing to lower provisioning, led by improved asset quality.

Auto companies in focus on high volumes

Along with banking, the automotive sector is expected to show positive surprises, led by strong volume growth in the upcoming quarterly results.

In the middle of the April to June quarter of FY27, the sentiment for the Auto sector dampened amid high crude oil prices affecting auto sales demand.

Companies like Tata Motors PV, Maruti Suzuki, and M&M reported strong double-digit growth in the range of 20% to 60%. Hyundai Motors India posted monthly sales of 51,335 despite a production loss due to a fire at a supplier’s plant.

The two-wheeler space also recorded strong growth, with TVS Motor Company posting 46% growth in June. Bajaj Auto recorded a 28% jump in volumes.

Despite the impact of elevated crude oil prices, the automobile sector is expected to deliver a positive surprise in the Q1 earnings season.

Is IT set to be the top laggard?

Indian IT sector, which is also a top contributor in the benchmark index, has anchored the growth of the overall index due to its consistent underperformance in the market.

The sectoral underperformance is largely driven by a poor earnings growth outlook for the coming quarters. The IT industry continues to witness the aftermath of AI, but the company’s guidance is expected to show a sharp revision despite the integration of AI at enterprise levels.

Alongside this, slower discretionary spending and geopolitical tensions continued to influence decision-making at client levels for these IT companies. Against this backdrop, market analysts estimate that IT companies could post muted earnings growth in the upcoming Q1 results FY27.