Q1FY27 preview: Oil sensitive companies, IT to show margin impact; Banking and Auto to show positive surprises and more

The Indian benchmark indices started the Q2FY27 quarter on a positive note as both indices rose nearly 0.5% on Wednesday. The Indian markets closed the previous quarter with stellar growth, despite the volatility led by unstable geopolitical conditions. The NIFTY50 jumped 6.6% in Q1FY27, which is much better than Q4FY26, when the index fell over 14%. Q1 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 was the top gainer with 28.4% returns for the quarter ending June 2026, and NIFTY IT was the top loser with nearly a 12% drop, extending its losses from the Q4FY26, where it lost 23%.

The first month of Q2FY27 will largely be driven by earnings and their share price reactions. Here are key triggers that could influence Q1FY27 earnings.

Elevated energy prices

The Q1FY27 was an eventful and highly volatile quarter in terms of energy prices. The war in the Middle East led to a sharp spike in crude oil prices from $70 to $119 per barrel; the impact was visible with inflation spiking above 4% in recent months. However, the crude oil prices have now reversed all their gains made during the war, giving a breather to oil-importing nations like India.

Oil-sensitive sectors like FMCG, Paints, oil marketing, tyre, airline, and petrochemical companies are expected to show visible changes in the operating margins. The Indian crude oil basket prices went north towards $140 per barrel, suggesting a strong impact on the operating profits. The size of the impact is visible.

Ratings agency ICRA, in its latest report, has sharply increased its estimate of net losses for Indian airlines to ₹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.

The banking sector shows resilience

As other sectors face the brunt of higher energy prices and disrupted supply chains, the banking sector has shown strong resilience in turbulent times. The 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 acceleration from 5.3% recorded in the corresponding period last year. Similarly, the asset quality improved significantly as the gross-non-performing assets for Indian banks hit a multi-decadal low of 1.8%, underlining the top-notch asset quality of the Indian banking sector. The Q1FY27 results for the banking sector are expected to show better profitability, owing to lower provisioning, led by improved asset quality.

Automobile companies in focus, led by high volumes

Along with banking, the automobile sector is expected to show positive surprises, led by strong volume growth. In the middle of Q1FY27, sentiment for the 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.

IT the top laggard

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. The underperformance is largely driven by a poor earnings growth outlook for the coming quarters. The IT industry continues to witness the aftermath of AI. Increasingly. Increasingly, 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. Against this backdrop, analysts estimate that IT companies could post muted earnings growth in Q1FY27