Q2 results NSE, Q2 earnings: The Q2 earnings season (July–September quarter) has more or less concluded, with just a few not-so-popular names due to report their earnings by the next week. Amid this backdrop, brokerage firm Motilal Oswal is of the view that top companies from the Nifty pack have posted a broad-based beat, with cyclicals primarily driving earnings.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

“The 2QFY24 corporate earnings ended on a buoyant note with a widespread outperformance across aggregates driven by margin tailwinds,” the brokerage highlighted in its Q2 review report.

The scorecard for Indian Nifty companies is said to have gotten a boost from cyclicals, including auto, BFSI, and cement. “The earnings growth in MOFSL Universe was led by domestic cyclicals, such as BFSI and Auto. BFSI clocked a 33 per cent YoY growth, while the auto sector registered a notable growth of 112 per cent YoY (vs. est. of +87 per cent), driven by Tata Motors, Maruti, and M&M,” noted the brokerage report.

For PSU banks, Q2 has been a mixed bag, as credit growth for most banks was reasonably strong, Jyoti Roy, Head of Equity Research at Sanctum Wealth, told Zeebiz.com.

“The quarter saw healthy recoveries, which led to improvements in asset quality, with GNPA/NNPA ratios improving from decadal low levels. Lower provisions were also seen as aiding earnings growth.

However, the net interest margins (NIMs) came under pressure owing to the rising cost of funds, and the same is expected to continue. This was the key negative in the Q2 results for the PSU banks,” the market expert added.

Within the heavyweight club, Nifty companies logged a 28 per cent year-on-year (YoY) growth in PAT. Five Nifty companies—BPCL, HDFC Bank, Tata Motors, JSW Steel, and Reliance Industries—contributed 68 per cent of the incremental YoY accretion in earnings.

On the other hand, Geojit Financial Services' Vinod Nair highlighted that Q2 earnings have been buoyant and have come in line with the forecast given the significant decline in raw material prices.

"Sectors such as auto, capital goods, financials, real estate, and power outperform expectations, while IT and metals grapple with global challenges, and FMCG faces hurdles from elevated inflation and subdued rural demand," Vinod Nair, Head of Research at Geojit Financial Services, said.

Nifty is trading at a 12-month forward P/E ratio of 17.8x, which is at a 12% discount vs. its long-period average (LPA), according to Motilal Oswal’s India Strategy report.

Considering the sectors that have shown growth potential, the brokerage has maintained its overweight stance on financials, consumption, industrials, automobiles, and healthcare, while it is underweight on metals, energy, IT, and utilities. On the other hand, it has a neutral view of telecom in its model portfolio.

H2FY24 is seen to be positive for real estate, auto, infra, and consumer discretionary space

“For the next few quarters, we remain bullish on the real estate sector and anticipate strong earnings from it as project completion gains traction. Moreover, strong festive demand and upcoming general elections should be positive for earnings in H2FY24 and aid sectors such as consumer discretionary, automobiles, and infrastructure," opines Manish Chowdhury, Head of Research, StoxBox.