The first quarter earnings saw beats and misses in equal split, but the results on average still point to a robust growth outlook for the rest of the fiscal, according to HSBC.
Amid general concerns around the global slowdown, the investment bank said India’s earnings should stand out in the current fiscal and will likely act as a key catalyst for markets.
After relative underperformance for the first two months of the year, India has been the best-performing market since March. The FTSE India index is up 16.7% in USD terms as of 21 August, led by FII flows, strong earnings outlook and relatively stable macro conditions.
“Even as global growth concerns escalate, India still stands out, but earnings resilience is key to sustaining positive momentum,” HSBC said.
For HSBC’s coverage universe, average sales, EBITDA and PAT grew by 6%, 21% and 42% year-on-year, broadly tracking expectations, aided by margin expansion as key commodity costs declined. On average, the earnings growth trajectory for FY24 remains stable, it said.
The pharma sector witnessed significant earnings upgrades with an improved outlook, and autos, cable and wire companies, energy, banks and NBFC FY24 earnings were revised upwards as well.
Meanwhile, consumer durables, retail, utilities, agri chemical and the IT sector saw downward earnings revisions post the first quarter results.
HSBC expects margin tailwinds to continue and while rural demand on average was still lacklustre, demand is seen to pick up gradually in the second half.
However, rising inflation and its impact on demand, and prospects of bank NIM compression (even though banks delivered strong 1Q earnings) are key risks through FY24-end.
Industrials (excluding logistics) had a good first quarter, with strong order inflows and outlook aided by continued governmental capex even as exports look vulnerable.
The global Bank said it remains constructive on the Indian market, which it believes is going through a bullish phase.
“Given the valuation levels (slightly above the 5-year mean), market breadth of 85% and some emerging concerns like inflation, earnings resilience and earnings growth outlook will likely remain the key catalysts for the rest of 2023,” it added.
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