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The March quarter earnings season kicks off tomorrow, a market holiday though, with IT bellwether TCS announcing its numbers, and it couldn’t come at a more fragile time. After a nerve-rattling week driven by global fearmongering, Nifty bulls must now contend with the one force that truly steers stock prices—earnings.
In the last few days, the market has been making sharp swings on the basis of any news—or even a rumour—around the trajectory of reciprocal tariffs by Trump. But with earnings taking the spotlight, the stage is set for what could be a harsh reality check.
Motilal Oswal said the Q4 earnings remained essentially unchanged from previous quarters, with Nifty earnings growth expected at just 2% YoY. Kotak Institutional Equities expects Nifty profit to decline 0.6% YoY with most sectors likely reporting weak prints.
The earnings weakness seen in the previous three quarters of FY25 will likely persist in the last quarter of the year as well. As a result, Nifty is seen ending FY25 with a small earnings growth of 5% YoY.
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The earnings growth during the quarter is likely to be driven by metals (+24% YoY), telecom (loss to profit), and healthcare (+11% YoY), with modest contributions from BFSI (+2% YoY), and technology (+6% YoY), according to Motilal Oswal.
Private banks, PSU banks, and NBFC-lending earnings growth is expected to moderate to -3%, 4%, and -1% YoY, respectively. The private banking sector is projected to report its first earnings decline since March 2020, while PSU banks are likely to post the lowest earnings growth in 19 quarters.
"We reduce our FY25E/FY26E Nifty EPS by 2.9%/3.8% and expect it to grow 1%/14% YoY to INR1,017/INR1,157. The O&G, Metals, Auto, BFSI, and Technology sectors have led ~99%/95% cut in FY25E/FY26E Nifty earnings,” Motilal said.
Kotak Institutional Equities expects weak earnings growth from several sectors - banks (largely driven by NIM compression), commodity chemicals (muted demand and adverse operating leverage), construction materials (weak realizations YoY), consumer staples (weak urban demand, margin compression) and oil, gas & consumable fuels (weak refining and marketing margins).
Motilal Oswal added: "While 4QFY25 is likely to be another weak quarter in terms of earnings, we believe the market will begin to factor in growth for FY26, which may benefit from the depressed base of FY25. A bottom-up aggregation of our analysts' estimates suggests an FY26 earnings growth of 18%/14% for MOFSL/Nifty-50 respectively—although this is highly amenable to revisions due to the ongoing tariff-war induced uncertainties."
"Rural demand has been healthy, supported by strong agricultural output. The monsoon forecasts will be closely monitored over the next month for indications of sustained strength in rural demand, while urban demand is likely to benefit from tax stimulus. However, all of the above views carry the caveat of the uncertain impact of the tariff war situation globally," Motilal added.
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(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of The Economic Times)
