Analysts view Q3FY22 earnings substantial, encouraging; banking and IT outperform other sectors

With the third-quarter earnings season coming to an end, several analysts termed the December-end quarter as substantial and encouraging, especially for the sectors such as banking and IT, wherein the rising input costs weren’t a worry, unlike other sectors like cement, auto, metals, among others. 

The third quarter of the financial year 2021-22 (Q3FY22) was a good quarter for Indian IT Services as companies under our coverage reported an overall growth of 4.6 per cent (USD), despite seasonality due to furloughs, the domestic brokerage house Motilal Oswal Financial Services said in a report. 

It added, “Asset quality trends have improved. Most Banks reported a decline in their NPL ratios, led by controlled slippages and healthy recovery and upgrades.” 

Sonam Srivastava, Founder at Wright Research, SEBI Registered Investment Advisor said, “The Q3 numbers are substantial so far, with the banking sector posting impressive numbers. The IT sector also posted excellent numbers, but the stress from attrition and margin tightening can be seen.” 

“The biggest company on the index, Reliance, beat street estimates, while Tata Motors' results were mixed,” Srivastava added, expecting that the earnings growth to keep the pace going forwards as Omicron hasn’t had too much impact, and the Budget has provided a growth push.  

Terming December quarter earnings encouraging, Vaibhav Agrawal, CIO & Founder of TejiMandi said, “Q3 numbers indicating a strong underlying economic growth, albeit with some raw material and energy price inflation.” 

“There have been strong earnings across the board in IT, consumer, real estate and the banking industry. Many of these sectors continue to grow their cash flows at a CAGR more than 20 per cent over a 2-year period,” Naveen Chandramohan, Founder & Fund Manager – ITUS Capital.  

“Pharma has been mixed, especially around US generics and auto has been mixed due to supply chain disruptions,” Chandramohan added further stating that the next few years will be stock specific growth stories rather than talking about the market. 

Nifty EPS estimate for FY22E has been cut by 2.5 per cent to Rs 725 largely due to TTMT. FY23E EPS estimate remains unchanged at Rs 872 as downgrades in Metals and Autos have been compensated by upgrades in the O&G, Motilal Oswal said in its earnings review report.