This marks the second consecutive quarter of single-digit growth for the Nifty, a trend not seen since the pandemic’s onset in June 2020.
The aggregate performance was hit by a drag from global commodities (i.e. Metals and O&G). Excluding the same, Nifty posted 11% earnings growth.
Looking at sectoral performance, the BFSI sector was a standout performer, driven by robust growth in public sector banks, which reported a 34% YoY increase in earnings, well ahead of expectations.
Non-lending NBFCs also performed exceptionally, posting a 92% YoY growth. Technology (+8% YoY ) companies continued to deliver healthy performance, although the outlook remains slightly guarded as client spending remains uncertain, particularly in discretionary areas.
The healthcare sector showed resilience, benefiting from steady growth in chronic therapies, limited competition products, and favourable raw material inventory levels.On the downside, the consumption sector was notably weaker, impacted by inflation, adverse weather conditions, and weaker urban demand. In the oil & gas space, OMCs saw a dramatic decline in profits, contributing to the overall weakness in the commodities sector.Cement, chemicals, and consumer sectors also reported weak earnings, further dampened by global cyclicals like metals and O&G.
Despite these challenges, there were positive signs in rural demand, which showed a recovery thanks to the healthy monsoon and festive season, benefiting industries like two-wheelers and tractors.
With government spending expected to pick up in the second half of FY25, alongside a strong kharif crop and improving rural demand, the earnings outlook appears brighter for the coming months.
Although earnings growth has been revised down by ~7% in the last six months to ₹1057, the market’s fundamentals still indicate the potential for a recovery, making it an attractive time to focus on growth sectors like BFSI, healthcare, and technology as the economic environment stabilizes.
After a flat 1HFY25, we expect Nifty earnings to report a growth of 8% YoY. Excluding Metals/O&G, Nifty is expected to report a growth of 9% YoY for 2HFY25.
ICICI Bank: Buy| Target Rs 2050| LTP Rs 1250| Upside 64%
ICICI Bank continues to demonstrate strong performance, driven by healthy credit growth, improved asset quality, and robust cost control. The bank’s diversified business model, with a focus on retail, corporate, and SME lending, positions it well for continued growth.
With a stable asset quality outlook, improved provisions, and a growing fee income base, ICICI Bank is poised to sustain a steady earnings trajectory.
We anticipate a consistent PAT CAGR of around 12% over FY24-26, supported by ongoing investments in technology and enhanced underwriting practices.
ONGC: Buy| Target Rs 330| LTP Rs 242| Upside 36%
ONGC is well-positioned for robust growth driven by its expanding production from key assets like KG 98/2 and Daman. The ramp-up of gas and oil output from these fields, alongside strategic initiatives like LNG agreements, underscores its long-term potential.
The company’s production volume is expected to grow by 11% over FY24-FY27, supported by a solid capex plan. With ongoing improvements in key projects and a favorable pricing strategy for gas, ONGC is poised to strengthen its operational and financial performance in the coming years.
(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)