Corporate earnings for the first quarter of the ongoing financial year (Q1FY27) have surpassed Street expectations, with most companies across the board delivering double-digit earnings growth on an average despite higher crude prices and supply chain disruptions caused by the war in West Asia.Large-caps have logged double-digit earnings growth on an average so far, while mid- and small-cap companies are seeing even higher growth.This is also in contrast to the sluggish broader market performance, as the benchmark Nifty 50 has declined by roughly 6.7% so far in 2026, while the BSE Sensex has crashed over 8% year-to-date.While the markets have picked up over the last month, with the Nifty 50 gaining over 2% in July, most market participants feel it’s too early to upgrade earnings estimates based on better-than-expected earnings of a single quarter.Surpassing Street expectationsCompanies in the Nifty 50 index saw their net profits grow by 11.2% year-on-year on average in Q1FY27, 3.5% higher than expectations, according to a report by Kotak Institutional Equities. This is based on 25 of the Nifty 50 companies that have so far announced their results. Profits across the approximately 250 companies covered by the firm grew by nearly 16%, the report showed. This excludes oil and gas companies, which depend on volatile conditions and can skew earnings.Also Read | Industrial growth rises to 7.3% in June, highest in 23 months“On the earnings side, when we look at the 32 companies that have come out with their results, both top-line and bottom-line growth have been better than the Street’s expectations. The expectation was high single-digit kind of growth, and what has come out is 17% kind of top-line growth and 12% kind of bottom-line growth,” according to Pankaj Pandey, head of research at ICICI Securities.Story continues below this adEarnings for the quarter were expected to be weighed down by the ongoing war in West Asia. However, adequate inventory levels and calibrated pricing measures by many shielded most companies during the quarter, according to experts.Too early to upgradeMost market participants expect earnings to grow in the low to mid teens in the coming quarters, compared to the single-digit growth seen over the past couple of quarters.However, they still believe it is too early for earnings upgrades.“It is too early. See, what we are pencilling in is a 16% CAGR kind of a growth (in earnings) over the next 2 years. But at least we see that earnings are tracking ahead of our expectation, so we don’t see any material risk to our expectations,” said Pandey of ICICI Securities.Story continues below this adThis is despite many global firms trimming their earnings expectations for a majority of Indian companies over 2025 and early due to factors like slowing earnings growth, elevated valuations, sluggish domestic consumption, persistent foreign investor outflows, and risks posed by the West Asia war.Also Read | Services sector growth may have fallen sharply in May, suggests MoSPI’s experimental dataFor example, Goldman Sachs had halved its earnings growth expectations for Nifty 50 companies to 8% for 2026. Other global players like HSBC, Jefferies, and Morgan Stanley had also undertaken similar cuts. Earnings expectations are the basis of a market’s valuation. A cut in earnings expectations means market participants value a market lower than they previously did. Thus, with Q1 earnings exceeding expectations, the argument is for experts to upgrade the earnings expectations for Indian markets.“The earnings downgrades were mainly because the earnings growth projected by companies was very high previously. We need to wait and watch before upgrades. In the next few quarters, I don’t expect earnings to grow very rapidly, but I think an 11-12% growth is decent considering the global scenario remains uncertain,” said Pravin Bokade, research head at IDBI Capital.Concentrated pockets of valueStory continues below this adKotak’s report from last Sunday flagged a “valuation paradox” in the market, a sentiment echoed by many experts. “We do not find much value in most parts of the market, despite overall market valuations looking quite reasonable,” the report noted.This was as valuations — which were a major concern after the rally in late 2024 — had corrected back to reasonable levels in 2025 and 2026 due to a sharp pullback especially in banking and IT services stocks. Since these sectors make up a big portion of the benchmark indices, the aggregate valuations of the indices also corrected despite some sections of them still trading at high premiums.Also Read | Explained: The many benefits of replacing paper notes with plastic ones“Everywhere else, the SMID and select large-cap rally of the past three months means there isn’t much left that’s actually cheap,” noted Tanvi Kanchan, associate director at Anand Rathi.Earnings growth is also similarly concentrated.“The strength is still concentrated in a few sectors. Banks continue to surprise positively with stable asset quality and healthy loan growth. Companies linked to infrastructure, power, capital goods and defence continue to enjoy strong order books, which gives confidence that their earnings visibility remains intact for the next couple of years,” according to Amar Deo Singh, research head at Angel One. Meanwhile, sectors like IT services remain uncertain.Story continues below this adThe consensus is that earnings growth will be the single biggest factor in the Indian stock market going ahead.Thus, experts remain watchful on this growth turning more broad-based and widespread before upgrading their earnings expectations, with current growth levels seen as positive. Factors like the West Asia war, geopolitical conditions, capital expenditure by the private sector, and rainfall distributions remain key aspects to be monitored.