The June 2023 quarter earnings season so far has been muted on account of results disappointments or slower growth in IT, cement, metals and oil & gas sectors. Banking and financial services along with auto companies witnessed earnings growth. Lower commodity prices weighed on the profitability of metals and energy companies, while a weak pricing environment dragged down the bottom line for cement producers.
“Global economic environment continues to be uncertain and could weigh on earnings revision of the stocks related to the global economy,” said Vinod Karki, equity strategist, ICICI Securities. “Given the nature of the economic recovery in India, which is led by growth in ‘gross fixed capital formation’ or capex cycle, we expect the earnings upgrade cycle to continue for domestic cyclicals.”
The IT sector saw cuts in guidance due to an uncertain demand environment, lower discretionary spending, delayed client-level decision-making, and a decline in people addition. Tech Mahindra, Infosys, LTI Mindtree, and TCS have seen downgrades in earnings in the last four weeks.
The top upgrades include BPCL, Tata Motors, Zomato, Indus Tower, HDFC AMC, Dr Reddy’s and United Spirits.
“The bright spot amongst the gloom continued to be financials and automobiles, within which the banking sector benefited from healthy loan book growth and mostly stable asset quality while two-wheelers and passenger vehicles rode the strong offtake along with easing commodity and supply chain issues,” said Manish Chowdhury, head of research, StoxBox.
“Though we do not expect a sharp cut to FY24 earnings on an aggregate level supported by domestic themes such as strong credit growth, robust capex cycle and green shoots in rural demand, we do foresee challenges for the export-oriented businesses as we move ahead amid global macroeconomic worries due to an impending recession in the US and a slowing European economy,” he said.