The earnings season for the first quarter of FY25 has delivered a mixed performance across Indian companies, revealing a complex picture of slowing growth and varied sectoral results. Despite a generally moderate uptick in revenue and margin expansion, several brokerages have flagged concerns over the sustainability of this performance in the face of domestic and global headwinds.
Growth Moderation and Sectoral Disparities
According to Amish Shah of Bank of America Securities (BOFA), consensus estimates for Nifty’s earnings growth in FY25 have been revised down to 10%, a notable deceleration from the 18% growth seen in FY24. This slowdown is attributed to weaker performance across key sectors such as Energy, Financials, and Discretionary. Shah indicates that while potential positive surprises may come from Autos, Industrials, Healthcare, and IT, these are unlikely to fully counterbalance underperformance in Financials, Metals, and Energy. Additionally, global economic sluggishness presents an added risk.
Rajiv Batra of JP Morgan echoed similar concerns, describing the Q1 results as lackluster. While there was a moderate improvement in revenue and margin expansion, Batra noted that the benefit from lower input costs has largely dissipated. The quarter’s performance was hindered by limited government expenditure, a high base effect from the previous year, demand fluctuations, and rising competition. He highlighted that domestic cyclical sectors performed better compared to their global counterparts but cautioned that the market is likely to remain range-bound due to domestic challenges and global volatility.
Earnings Revision and Market Outlook
Surendra Goyal of CITI observed that the earnings revision for Nifty has flattened, a shift from previous upward revisions. The target for Nifty is now set at 25,000, with Goyal advising caution at current levels and suggesting a more opportunistic approach to buying on dips. He downgraded Autos to Neutral but recommended adding Indus and MGL to preferred lists for midcap stocks.
In contrast, Ridham Desai of Morgan Stanley reported a steady earnings growth trend for Q1 FY25, slightly surpassing expectations. Desai highlighted robust earnings beats and improved margin expansion breadth, with domestic-facing sectors leading the performance. This suggests resilience in certain segments despite broader economic concerns.
Sunil Tirumalai of UBS painted a more cautious picture, noting a sharp slowdown in BSE 200 operating profit growth to a seven-quarter low of 2.1% year-on-year, excluding financials. This stagnation was largely driven by declines in the energy sector. Tirumalai observed strong rural demand recovery across Autos, Consumer Staples, and Financials but also noted a slowdown in unsecured loans and moderated order inflows for capital goods due to election-related uncertainties. He advised caution given the high valuations amidst ordinary fundamentals.
