5 companies that will drive Nifty’s earnings in Q4

Apr 20, 2023

By: Malini Bhupta

Tepid earnings season

The earnings season has begun on a sombre note with the IT sector reporting weak numbers. Given all the drama that markets witnessed in FY23, earnings growth is seeing some moderation.

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Nifty earnings in Q4

According to analysts, top companies in Nifty50 are expected to clock earnings growth of around 14 percent in Q4FY23. Growth will be driven by auto and BFSI. Auto earnings are likely to rise by nearly 70 percent YoY.

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Earnings likely to be lopsided

Earnings growth will not be uniform across sectors in the last quarter of FY23 as the commodities businesses will see a bigger drop in profits than others.

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The big loser of Q4

The Metals pack is expected to report a 35 percent fall in earnings, says a report by Motilal Oswal Investment Services.

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Top 5 heavyweights that will drive Nifty earnings

According to MOFSL, SBI, ICICI Bank, ONGC, Tata Motors & BPCL are likely to contribute 82 percent of incremental year on year accretion in Q4 earnings.

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Nifty sales and EBITDA show signs of slowdown

Analysts expect sales of Nifty companies to grow by 9 percent and EBITDA to grow by 16 percent in the last quarter of the financial year.

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Modest growth in many sectors

Specialty chemicals, healthcare and cement are expected to report earnings growth in single digits during the quarter.

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Valuations turn attractive

After a flat year, Nifty50 now trades at 18x one year forward PE (price is to earnings multiple). This is a fair fall from 21x level seen at the start of the calendar year 2023.

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Relative valuations still high

While valuations have moderated in absolute terms, the relative valuation of MSCI India trades at a 82 percent premium to MSCI EM index. India’s long-period valuation premium has been around 67 percent.

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FPIs not likely to return in a meaningful way anytime soon

Foreign institutions sold equities worth $5.5 bn in FY23 after an outflow of $16 bn in FY22. Domestic institutions in contrast put $31 bn in FY23 and $27bn in FY22. Experts believe FPIs are unlikely to return in a hurry.

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