India Inc: Key Takeaways from Q3 Earnings Season

As we conclude the Q3 2024 earnings season, a comprehensive analysis shows that Nifty’s performance is broadly in line with market expectations. While there are no major surprises, topline growth continues to trend moderately across the sector. In particular, Nifty’s net profit growth has slowed due to sluggish profit growth in major Nifty constituents such as finance, IT, and FMCG. In this article, we’ll take a closer look and see what insights we can glean from this earnings season.

Over the past five quarters, the average growth rate of revenue and net income has been 14% and 12%, respectively. The most recent quarterly revenue and net income growth for the third quarter of fiscal 2024 was 9% and 15%, respectively. This indicates a modest slowdown in sales expansion, although this is offset by strong profitability performance.

During the third quarter of fiscal 2024, banks led in terms of revenue generation, while automotive was the best performer in terms of both revenue and revenue. The infrastructure and capital goods sector performed commendably thanks to the government’s continued emphasis on capital expenditure plans.

For banks, business momentum in terms of growth remained good in the third quarter of FY24 with major banks reporting strong sequential growth. But the pain of deposits remained a concern, and it continued to lag loan growth. Banks continued to rely on term deposits to increase deposits, worsening the CASA ratio. The net interest margins of major banks have declined or flattened due to the impact of higher costs of funds. The asset quality environment, which had been benign for some time, is now showing signs of distress, with slippage ratios at some major banks rising. It’s no wonder to say that the best banking landscape is behind us, so keeping a close eye on the developments of individual banks will be a key factor in creating wealth in this space.

The automobile sector continued its remarkable performance this quarter. This can be seen in the impressive 85% increase in after-tax profits and the 16% jump in total revenue compared to the previous year. This significant increase in profitability can be attributed to a number of factors, including lower raw material prices, easing supply chain issues, and exchange rate stability. This growth was driven by strong demand for premium cars, mainly in urban areas.

The IT sector posted decent numbers that exceeded low expectations. These subdued expectations were mainly influenced by macroeconomic conditions, decline in discretionary spending and seasonality. The segment also delivered strong margin performance and consistent deal wins, with attrition rates during the quarter hitting multi-year lows.

Pharmaceutical companies achieved remarkable performance through growth in domestic and export sales. International markets – primarily the United States. Sales increased as raw material costs decreased and price pressure eased, and lower crude oil prices helped improve consolidated margins.

In the FMCG segment, revenue and net profit growth declined primarily due to weak rural demand and increased competition resulting from slow volume growth.

While the real estate industry’s performance was sluggish, the energy and PSE industries showed steady performance growth compared to the same period last year. Overall, companies remain optimistic about their future growth prospects after the third quarter of fiscal 2024 earnings season.

Technical outlook:

Nifty ended the week on a positive note with a significant gain of 0.78%, hitting a new high of 22,298 and ending the session at 22,213.

Technically, Nifty continued to rise following higher highs and higher lows on daily time frames and held above 20 and 50 Simple Moving Average (SMA) while Relative Strength Index (RSI) maintained a strong position at 62 level. I maintained it.

Support is located at 22,000 followed by 21,900, and resistance remains at 22,500.

As long as the fear index India VIX remains below the 16 level, moderate movements in the index are expected.

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