In the first quarter of the current fiscal year (Q1FY25), the Nifty 50 reported a modest 4% year-on-year (YoY) growth, slightly above expectations on Dalal Street. This marked the first instance of single-digit EBITDA growth in four years, with the last occurrence being in September 2020.
According to Motilal Oswal Financial Services, the net profit growth of 4% was the lowest since the pandemic-affected quarter in June 2020. The overall growth was largely driven by domestic cyclical sectors, with healthcare, real estate, capital goods, and metals making significant contributions.
However, the aggregate performance was dampened by a decline in oil marketing companies (OMCs). Notably, five Nifty companies—HDFC Bank, Tata Motors, ICICI Bank, Maruti Suzuki, and TCS—contributed 127% of the incremental YoY earnings. On the flip side, BPCL, JSW Steel, ONGC, Reliance Industries, and Grasim Industries had a negative impact on Nifty’s earnings.
Auto and Banks Take the Lead in Q1FY25
Elara Securities (India) Pvt Ltd noted that the auto sector outperformed expectations, with most companies experiencing solid YoY growth, except for those in commercial vehicles and tires. The banking sector also slightly exceeded expectations despite facing challenges, including sluggish deposit growth affecting net interest margins (NIMs) and signs of cooling in the unsecured loan segment.
FMCG and Pharma Sectors Show Promise
The long-awaited recovery in rural consumption appears to be taking shape, benefiting the fast-moving consumer goods (FMCG) sector. While price hikes drove earnings growth in FY24, a shift towards volume-led growth is anticipated moving forward. Although rural growth still trails urban growth on a two-year CAGR basis, it has shown improvement YoY, while urban growth has decelerated.
In the Pharma sector, earnings grew by approximately 28% YoY, slightly exceeding expectations, though performance varied within the sector. The US generics market remains the primary growth driver, while contract development and manufacturing organization (CDMO) companies continue to face challenges. Major hospital chains are showing early signs of slowing growth and margin pressure.
