As the fourth quarter earnings season gets underway, analysts are closely monitoring expectations for the Nifty index. Many brokerages anticipate a modest profit growth, largely fueled by domestic and consumption-driven sectors. However, ongoing macroeconomic risks will remain a significant factor influencing market behavior in the coming months.

Nifty Earnings Projections: A Mixed Bag

Axis Securities forecasts a 4.8% revenue growth for the Nifty in Q4, with EBITDA expected to increase by 2.9% and PAT growth projected at 1.3% year-over-year. Notably, when excluding sectors like Oil & Gas and Metals, Nifty profits could see a growth rate of 2.9% YoY.

Additionally, a report from Anand Rathi predicts a 14% growth for the Nifty50 in Q4, contributing to a projected 10% earnings growth for FY25. The report highlights that while the first half of FY25 may show subdued earnings, the better-than-expected Q3 results—featuring an 11.5% PAT growth—were predominantly driven by the financial and healthcare sectors. To achieve the anticipated 10% earnings growth for FY25, a 14% growth in the remaining quarters will be essential, bolstered by increased government capital expenditure and a recovery in agricultural productivity.

Key Influences on Q4FY25 Earnings

Several factors are likely to shape the earnings landscape in Q4FY25:

• Increased Capex Spending: A sequential rise in capital expenditure is expected.
• Supportive Economic Measures: Positive interventions from the RBI and government will play a crucial role.
• Market Volatility: Currency fluctuations, trade dynamics, and crude oil price volatility could lead to mixed earnings trends.

While some sectors may experience an uptick, broader consumption demand may take a couple of quarters to stabilize fully. Axis Securities anticipates improvements in sectors like BFSI, IT, healthcare, telecom, and industrials, while consumer staples, retail, and cyclical sectors like Oil & Gas may continue to struggle.

Navigating Macroeconomic Risks

In the short term, macroeconomic challenges such as trade policy uncertainties and global market slowdowns will likely impact market direction. Axis Securities emphasizes that the market may see a divide between domestic-focused and export-oriented sectors. Currently, domestic sectors appear to offer a more favorable risk-reward scenario due to minimal exposure to tariffs, while export sectors remain cautious amid ongoing developments.

Large-cap stocks, particularly those recognized for their quality and leadership, are expected to outperform in the near future, particularly those that are domestically focused.

Sectoral Insights for Q4FY25

NBFCs Outperforming Banks

Axis Securities indicates that banks are projected to achieve around 12% YoY credit growth, aligning with industry trends. However, management commentary regarding growth trajectories will be critical. In contrast, NBFCs are expected to see a sequential improvement in disbursement momentum, leading to robust asset under management (AUM) growth.

Resilient Cement Demand

Cement demand in India remains strong, especially in Q4FY25, following a vigorous December 2024. Core sector data reveals double-digit growth, propelled by heightened construction activity. Axis Securities notes that demand conditions are expected to continue strengthening, with projected volume growth of 6.6% YoY.

Power Sector Growth

Electricity demand has surged to 416 billion units from 400 billion units year-on-year, with peak demand hitting 238 GW during Q4FY25. This growth is attributed to an early onset of summer and increased consumption.

FMCG Performance

In the FMCG sector, Axis Securities predicts continued softness in volume growth, particularly in urban markets, while rural areas show better performance. Seasonal demand shifts may also affect consumption patterns, with companies adjusting prices to counteract input cost inflation.

Automotive Sector Challenges

The automotive industry is facing earnings downgrades due to weakening demand. However, the tractor segment is expected to outperform other categories, supported by favorable weather conditions that revitalize rural demand.

Pharmaceutical Sector Outlook

Pharmaceutical companies are projected to see a 10.9% revenue growth YoY, driven by domestic formulations and niche launches in the U.S. market. However, potential tariff impositions on Indian pharma firms could pose challenges.

In summary, while the fourth quarter earnings season presents a mixed outlook for various sectors, strategic positioning and external economic factors will heavily influence performance. Investors should remain vigilant and responsive to these evolving dynamics as the earnings reports unfold.