The corporate earnings outlook for H2FY25 hinges on government spending and rural demand recovery, but sustaining growth will require stronger sectoral performance, Nuvama Research noted. A 2% cut in Nifty’s FY25 EPS estimate to Rs 1,057 further underscored the challenges, the brokerage said.
India’s corporate earnings for Q2FY25 showed an 8% year-on-year profit after tax (PAT) growth for the BSE500, excluding oil marketing companies, down from 10% in Q1FY25, with major drags from Shree Cement, JSW Steel, and Bajaj Auto.
Cement companies, for the first time in decades (excluding COVID-19), saw their revenues contract, burdened by declining EBITDA per ton and subdued demand. Commodities, especially metals and energy, struggled with profitability challenges, including weak performances from JSW Steel and Reliance Industries. Auto companies such as Bajaj Auto saw pent-up demand fade, while global OEMs forecast subdued volumes for CY24.
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Exporters faced mixed fortunes, with IT earnings stabilizing but auto exporters experiencing headwinds. Domestic consumption growth slowed across segments, while discretionary sectors like durables and retail contracted sharply.Operating cash flow growth for H1FY25 dropped to 7%, down from 19% in FY24, and capex growth for BSE500 companies also moderated to 13%, underscoring broader economic sluggishness, the brokerage reported.While the market anticipates a recovery in H2FY25, Nuvama warns that optimistic growth expectations may disappoint. The brokerage recommends defensive positioning with an emphasis on BFSI, healthcare, and IT sectors, cautioning against cyclicals and energy stocks amid persistent macroeconomic uncertainties.
The outlook depends on a rebound in government spending and rural demand. However, sustaining a recovery will require a stronger and more uniform sectoral performance, Nuvama Research concluded.
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