Q4FY24 earnings season was marked by a) Strong domestic macroeconomic environment, b) Robust PMI manufacturing and Services, c) Stronger E-way bill and GST collection, and d) Strong pickup in electricity demand. Domestic-facing sectors largely enjoyed the economic recovery backed by these factors and hence, margins may surprise positively. Most of the domestic high-frequency indicators have trended higher during the quarter which is likely to translate into good demand momentum for the domestic corporate segment. However, at this juncture, commentaries on margins and the guidance for FY25 remain critical. Auto, cement, Healthcare, Pharma, Industrial, Oil & Gas are likely to post strong earnings while metals, Chemicals and IT sectors are likely to face pressure. Based on our and consensus estimates, we forecast Nifty to deliver Revenue/EBITDA/PAT growth of 5.5%/8%/10.5% respectively for the quarter. Moreover, excluding Oil & Gas, Nifty Revenue/EBITDA/PAT is expected to grow by 6.1%/10%/7.9% respectively.
We believe the market fundamentals will be driven by “narrative” in the near term, especially in the absence of any major trigger. The market will continue to find direction based on 1) Macroeconomic developments, 2) Direction of bond yields, 3) Oil prices & dollar index, 4) Q4FY24 earning season, and 5) Pre-election cues. In light of the above developments in view, we believe style and sector rotation will play a critical role in the alpha generation moving ahead. Moreover, with a strong catch-up by Midcaps and Smallcaps in the last couple of months, we still believe the margin of safety in terms of valuations for these segments at current levels has reduced as compared to that available in Largecaps. Keeping this in view, the broader market may see some time correction in certain pockets in the near term and flows will likely shift to Largecaps. Based on this, we believe Nifty 50 could see a new high in the near term. However, the long-term story of the broader market continues to remain attractive. Furthermore, the market is now eyeing the upgrades and downgrades during Q4FY24 earnings season. We could see consolidation in the market if downgrades are higher than upgrades in the near term. However, the market could see a positive response if downgrades remain limited. Currently, we foresee FY25/26 NIFTY Earnings at 1068/1199 and we will revisit our estimates after the Q4FY24 earnings season.
OUR TOP 9 “TRADING BUYs” Earnings Play: SBI, Eicher Motors, UltraTech Cement, Hindalco, Minda corp, Nalco, PNC infra, Trent and Ethos
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