According to New Wealth Management, Nifty earnings may grow 10 percent year-on-year (YoY) in Q3FY24. The brokerage firm pointed out that the gap between the top line and profits is now narrowing and given the high base, earnings are likely to moderate further in Q4FY24.
“The strong first half of the financial year 2024 (H1FY24) ensured limited downside risks to FY24 earnings,” Nuvama said.
“After a strong H1FY24 (nearly 18 percent PAT growth), we expect our coverage universe (ex-OMCs) profits to moderate to 10 percent,” Nuvama said.
The brokerage firm believes the top line may remain muted in commodities, exporters and consumption, but also soften (still above 10 percent) in BFSI, industrials and autos.
On a YoY basis, Nuvama expects PAT to be strong (over 20 percent) in industrials, autos and cement but weak (less than 10 percent) in BFSI, FMCG, IT, chemicals, consumer services, etc.
“Overall, demand remains weak (consensus predicts an increase in H2FY24) as marginal tailwinds fade. If sustained, it poses risks to FY25/26 consensus estimates,” Nuvama said.
Also Read: Q3 results preview: IT firms expected to post subdued revenue, weakened profit amid weak demand
Kotak Institutional Equities expects Q3FY24 net income from its universe to increase 22 percent YoY overall, but 20 percent YoY excluding oil marketing companies (OMCs).
It expects OMCs to report a sharp rise in net profits YoY due to large market losses in Q3FY23. Apart from OMCs, Kotak expects strong YoY increase in net income from (1) autos (higher volumes, richer product mix and led by Tata Motors), (2) banks, (3) capital goods (strong execution and margin improvement) , (4) building materials (higher profitability, led by an increase in realization and lagged benefit from lower fuel costs), and (5) metals and mining (realization-driven increase in YoY profitability) sectors.
Also read: Q3 results preview: Banking sector earnings could moderate; NIM compression to ease from Q2 levels, says Motilal Oswal
Meanwhile, Kotak expects electric utilities to report weak earnings while fertilizers and agrochemicals may report losses. IT services may report weak earnings, according to Kotak.
Kotak expects Q3FY24 net profits of the BSE-30 index to increase 12 percent YoY, but decline 2 percent QoQ. Net profit for the Nifty 50 index may increase 12 percent YoY but decline 4 percent QoQ.
Also read: Q3 results preview: Construction sector expected to see revenue growth of 10% YoY; margins to remain stable
Kotak expects the earnings per share (EPS) of the BSE-30 index at ₹3,112 for FY24 and ₹3,567 for FY25. For the Nifty 50idex, the brokerage firm expects an EPS of ₹974 for FY24 and ₹1,086 for FY25.
Also Read: Q3 results preview: FMCG sector expected to see mid-digit volume growth, margin expansion trend to continue
Abhishek Jain, Head of Research at Arihant Capital expect Q3 results to present a mixed chart with slightly weaker overall performance.
He expects the IT sector to have muted revenue growth and this concern was even reflected on the Dalal Street, where shares of IT companies witnessed a correction. However, mid-cap IT selection can surprise with strong revenue growth.
FMCG companies may once again post a set of flat numbers due to some slowdown in the rural economy. However, an increase is expected as things have improved from December onwards, Jain said.
For financials, Jain believes they could face margin pressure, showing weakness quarter-on-quarter, although strong top-line growth is projected. In the travel and leisure sector, discretionary spending is likely to emerge, which will help companies in this sector post good quarterly numbers.
Also Read: Q3 results preview: NBFCs likely to see healthy profit growth of 27% YoY amid easing margins
Gaurang Shah, Senior Vice President at Geoit Financial Services expect that banking and finance will perform well in Q3 due to a drop in the numbers according to advances that some of the banks have already declared. In addition, he expects better earnings in IT, cement, metals and FMCG.
“Private sector banks, public sector banks and strong NBFCs should do well,” Shah said.
What should investors do?
The third quarter numbers are expected to be a mixed bag for the market and experts recommend focusing on the long-term drivers of the market.
Trivesh D, COO, Tradejini observed due to the upcoming elections, corporate India will tread carefully in allocating capex budgets for the coming year, which will also be visible in the revenue potential of Q3.
Trivesh believes the upcoming Budget is also unlikely to be a major catalyst for the market, with investor attention focused on Q3 earnings season and the central bank’s monetary policy decisions.
Trivesh said the focus should remain on the long-term drivers of the market, including the post-election landscape and the potential for sectors such as IT and banking to bounce back from current headwinds.
“I feel that Q3 is likely to be a period of mixed signals for the Indian market. While cautious optimism is warranted, investors should be aware of the potential for near-term volatility,” Trivesh said.
Disclaimer: The views and recommendations above are those of individual analysts, experts and second-hand companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 08 Jan 2024, 15:00 IST