Financials, autos lead Q4 earnings for India Inc in an otherwise lopsided quarter

Despite a challenging global macro backdrop, India Inc’s profitability remained healthy in the fourth quarter, but concentrated in just two sectors, according to Motilal Oswal.

The earnings were driven by financials and auto companies, while metals dragged aggregate profitability.

Overall, the results were mostly in line with expectations as the companies which Motilal Oswal gave coverage for, reported the highest earnings growth in the last four quarters.

While the Nifty earnings growth was at 16% year-on-year (YoY), BFSI and auto posted 43% and 115% YoY earnings growth respectively.

The banking sector reported a strong fourth quarter, driven by healthy loan growth, stable margins, and continued asset quality improvements.

There were also numerous drivers of credit expansion, with the retail and MSME sectors exhibiting robust growth and the corporate book displaying a healthy rebound.

On the contrary, metals recorded weaker-than-expected performance with 45% YoY decline in the fourth quarter earnings, with Tata Steel being the biggest drag, whose profit tanked 83%.

Apart from the metals sector, cement, healthcare and retail sectors were also laggards in the fourth quarter, dragging the overall performance down.

Excluding metals and oil and gas segments, companies reported 34% and 30% YoY earnings growth. However, if we exclude the BFSI segment, profits grew just 4% for companies repoted by Motilal Oswal.

The strong show of heavyweight stocks continued in the March quarter, with only five companies --- SBI, Tata Motors, BPCL, Reliance Industries, and Axis Bank --- contributing 96% of incremental YoY growth in earnings.

Nifty ended fiscal 2023 with 11% EPS growth, dropping 0.6% YoY. In FY23 too, earnings remain lopsided with BFSI driving almost the entire incremental earnings.

"With healthy macros, range-bound oil prices, robust fiscal balance sheet and moderating inflation, the backdrop for the market is quite optimistic," Motilal Oswal said.

The domestic brokerage has maintained its overweight stance on financials, capex, autos and consumption, while staying neutral on IT and healthcare.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)