JM Financial Adjusts Nifty Earnings Projections for FY25 and FY26 Amid Market Uncertainty
In a recent assessment, JM Financial has revised its growth forecasts for Nifty earnings per share (EPS) for fiscal years FY25 and FY26, attributing the changes to concerns over market volatility and US tariffs. Venkatesh Balasubramaniam, the Managing Director and Co-Head of Research at JM Financial, highlighted potential risks, particularly in sectors like IT, automotive, and chemicals, predicting that nearly 35% of their coverage universe may face downward earnings adjustments.
Concerns Over Sector Performance
Balasubramaniam expressed cautious optimism about the upcoming fiscal years, estimating that EPS growth for FY26 may struggle to exceed 8% to 10%. He noted that the sectors most vulnerable to earnings reductions include:
- Information Technology (IT)
- Automotive and Ancillary Industries
- Chemicals
- Industrials
The executive emphasized that while IT isn’t directly affected by tariffs, secondary impacts could arise from a potential slowdown in the US economy, which would consequently affect IT service demand.
Banking Sector Outlook
While the banking sector has shown resilience, Balasubramaniam warned of potential short-term challenges stemming from aggressive rate cuts. These cuts could compress net interest margins (NIMs), especially since many loan books are tied to the repo rate. The fourth quarter could present hurdles with:
- Slower loan growth
- Increased credit costs
- Compressed NIMs
Investment Preferences and Strategies
Balasubramaniam advocates for investment in stocks that offer reasonable valuations, particularly in the consumption sector. He stated, "I prefer stocks that make sense on PE multiples—aiming for nothing higher than 25-30 times one or two years ahead."
Some recommended picks include:
- Varun Beverages
- Maruti Suzuki
- Bharti Airtel
- Reliance Industries (RIL)
- UltraTech Cement
- DLF in real estate
He believes that falling crude prices are a significant advantage for India, positively impacting oil marketing companies and refiners, as refining margins are expected to remain robust.
Caution in Commodity Investments
Balasubramaniam maintained a cautious stance on commodities, predicting weak price trends over the next six to nine months due to global uncertainties. He advised investors to hold off on making decisions regarding tariff-sensitive stocks until the end of April, emphasizing the importance of patience amid ongoing market fluctuations.
Investors are encouraged to stay informed and adopt a strategic approach, especially in the face of evolving economic conditions and market volatility.
