Will banks and auto drive Nifty earnings in Q2?

IT major TCS will kick-off India Inc’s earnings season for the second quarter of this fiscal year on October 10. A slew of IT companies like Wipro, HCL Technologies, and Infosys, will follow the suit.

In the previous quarter of this fiscal, corporate earnings saw double-digits growth, driven by banks, NBFCs, oil & producers, and FMCG companies.
 

A Business Standard analysis showed that the combined net profit of nearly 3,000 listed companies had increased 22.4 per cent year-on-year to 2.2 trillion rupees. However, higher material, and energy costs dented margins in Q1FY23. Ebitda margin for the entire sample was down nearly 410 basis points YoY to 22.5 per cent.

In Q2, however, bottom-line growth is likely to suffer due to higher operational costs, and inventory losses. Top-line growth, meanwhile, may stay in double-digits. Among sectors, top tier IT firms are likely to post sequential revenue growth of up to 5 per cent, in constant currency terms, amid demand concerns.

Financials, and automobile companies, on the flipside, could outperform in Q2FY23.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services says financials and autos to post strong Q2. Within autos, PVs and CVs to lead recovery. Low demand to hurt IT. Capital goods, telecom will post good Q2, he says. 

Moreover, analysts foresee metals, IT, and oil and gas to underperform in the quarter under review. This, they say, could downgrade Nifty EPS for FY23 by up to 3 per cent.

Ambareesh Baliga, Independent Market Analyst says, double-digit top-line growth likely on aggregate basis. Auto, FMCG, BFSI to perform well, he says. Metals, IT, Oil & Gas to underperform. Nifty EPS downgrade likely for FY23.

Today investors will closely watch out India’s Services PMI data for September. Besides, global cues, rupee movement, FII flows, and crude prices will continue to dictate markets on Thursday.