The net profit growth of Nifty 50 companies is expected to decelerate in the June quarter, as the advantage of lower commodity prices observed in recent quarters has diminished and demand improvements remain sluggish.
Estimates indicate that the cumulative net profit in the Nifty 50 index is projected to rise by 5% year-on-year during April-June. This growth rate is significantly lower than the over 25% growth recorded in the fiscal year 2023-24.
The slowdown in growth for India Inc is also evident in expected single-digit topline growth for the third consecutive quarter, with cumulative net sales of the 47 companies projected to grow by 7% year-on-year. Among these, 13 companies are anticipated to report net profit growth exceeding 20%, while nine may experience a year-on-year decline. In terms of topline performance, 18 companies are expected to achieve double-digit growth, while four may see a decline in sales.
Banks to lead
Overall earnings growth is expected to be driven by the automobile and banking and financial services sectors, which have benefited from strong growth in the Indian economy in recent years. Conversely, earnings for cement, oil and gas, and chemical companies are expected to be weak.
Banks, which have the highest weight in the Nifty 50 index, are forecasted to report 12% and 13% year-on-year growth in cumulative net profit and net interest income, respectively, for the June quarter. However, moderation in earnings growth is expected to continue, as the primary growth drivers are behind us. Preliminary data suggests that loan growth has further slowed, and a 10-15 basis points decline in net interest margins is anticipated due to the re-pricing of deposits or seasonal slippages. Earnings growth for private and public-sector banks, estimated at 16% and 11% respectively, is the lowest in over ten and eight quarters.
Non-bank lenders and insurance companies are also expected to perform well, with strong topline growth momentum. The four financial companies in the Nifty 50, excluding banks and Bajaj Finserv, are projected to see a 22% surge in topline and an 18% increase in net profit.
Automobile companies, which were highly sought after last year, are expected to report robust April-June earnings, with a cumulative net profit growth of 31% on revenue growth of 9%. This growth is driven by higher product prices, a better mix, and strong sales in the two-wheeler and passenger vehicle segments, offsetting weakness in some rural areas.
