First time in 10 quarters: Nifty 50 earnings likely contracted in Q4

The January-March 2025 quarter (Q4FY25) is expected to show a decline in the combined net profits of Nifty 50 companies, according to brokerages.

 

Various estimates say the fall is anticipated at 1.9 per cent year-on-year (Y-o-Y), the first such contraction for the index companies since the September 2022 quarter, when their combined earnings were down 6 per cent.

 

For comparison, the index companies’ combined net profits were up 18.1 per cent Y-o-Y in Q4FY24 and had increased 4.9 per cent Y-o-Y in Q3FY25.

 

The contraction is likely to have been caused by a margin compression for banks and manufacturers and a further slowdown in revenue growth.

 

The 50 companies combined net sales (net interest income in the case of bank and non-bank lenders) are expected to have grown 5.6 per cent Y-o-Y, increasing at the slowest pace in at least 14 quarters. Their combined net sales were up 8.9 per cent Y-o-Y in Q4FY24 and they increased 6.3 per cent Y-o-Y in Q3FY25.

 

The analysis is based on quarterly revenue and earnings estimates of the Nifty 50 companies for Q4FY25. The aggregate numbers include the figures for Britannia Industries and Bharat Petroleum Corporation Ltd (BPCL), which were part of the index till March 31 but have since been replaced by Zomato and Jio Financial Services, whose results have not been reckoned on. 

 

The earnings slowdown is likely to have been led by banks, automotive companies, and consumer goods and oil and gas companies. According to brokerage estimates, IndusInd Bank, Tata Motors, BPCL, Trent, and State Bank of India are likely to be the biggest laggards in net profit in the fourth quarter. 

 

In contrast, telecom operators such as Bharti Airtel and mining and metal companies Hindalco, JSW Steel, and life insurers HDFC Life and Bajaj Finserv are expected to top the earnings charts with strong double-digit growth in net profit in Q4FY25.

 

On revenues, brokerages expect IndusInd Bank, BPCL, Maruti Suzuki, Oil and Natural Gas Corporation, and Tata Steel are likely to report a Y-o-Y decline in net sales in the fourth quarter.

 

On the other hand, HDFC Life Insurance Company, Trent, Bharti Airtel, Grasim Industries, and Bajaj Finance are expected to top the revenue charts with double-digit growth in net sales on a Y-o-Y basis in Q4FY25.

 

The combined net profits of index companies other than banks, financial services and insurance (BFSI) are expected to show growth of 0.2 per cent Y-o-Y. These companies’ combined net sales are likely to show growth of 5.3 per cent, the slowest in at least 14 quarters.

 

The combined net profits of index companies other than BFSI and oil and gas are expected to have grown just 3.1 per cent, the slowest in the last nine quarters. These companies’ combined net sales are expected to grow 3.1 per cent in Q425, down from 22.2 per cent a year earlier.

 

“In Q4FY25E growth momentum for domestic cyclicals is set to stall with earnings decline for autos and banks on a year-on-year basis. On the other hand, commodities would have a mixed performance, with metals and cements likely to improve and oil & gas decline. We expect an earnings contraction Y-o-Y across all market caps,” wrote Bino Pathiparampil of Elara Capital in his earnings preview for the fourth quarter.

 

Sanjeev Prasad, Sunita Baldawa, and Anindya Bhowmik of Kotak Institutional Equity wrote in their earnings estimate for Q4FY25: “We expect the 4QFY25 net income of the KIE universe to increase by a meagre 0.7 per cent Y-o-Y, with most sectors likely reporting weak prints. We expect (1) banks (largely driven by NIM compression), (2) commodity chemicals (muted demand and adverse operating leverage), (3) construction materials (weak realisations Y-o-Y), (4) consumer staples (weak urban demand, margin compression) and (5) oil, gas & consumable fuels (weak refining and marketing margins) to report weak earnings growth.”