Q4 Review: Nifty 50 Beats Expectations with 12% YoY Profit Growth

Corporate earnings exhibited robust performance in Q4 FY 2024, with broad-based outperformance across various sectors. The strong gains were primarily fueled by domestic cyclicals such as automobiles, financials, healthcare, capital goods, and cement industries. However, global cyclicals such as metals and oil & gas sectors weighed down profitability.

The Nifty 50 achieved impressive results, with a 12% year-on-year (YoY) increase in net profit. HDFC Bank, State Bank of India (SBI), ONGC, Tata Motors, and Coal India, five key Nifty companies, accounted for 72% of the year-on-year earnings growth. Excluding contributions from the metals and oil & gas sectors, the Nifty’s earnings experienced a 16% YoY expansion.

In FY 2024, Nifty’s earnings per share (EPS) rose by 2.6% to reach ₹1,005, up from ₹980 previously, driven mainly by significant upgrades in ONGC, Coal India, and SBI.

The margin advantages observed in the quarter ending March 2024 have diminished compared to the elevated base, highlighting the need for a rebound in revenue growth to drive future earnings. Currently, the Nifty is trading at a 12-month forward price-to-earnings (P/E) ratio of 19.2x, representing a 6% discount compared to its historical long-term average (LPA).

Sectoral Trends

Banks: The banking sector performed strongly in the March quarter. While net interest margin (NIM) outcomes varied, several banks noted margin improvements. Credit expansion supported overall growth, particularly in the retail and MSME sectors. Public sector banks (PSUs) notably demonstrated significant enhancements in operational performance. Substantial net interest income (NII) growth, consistent fee income, and treasury gains contributed to a healthy increase in net profit.

Automobile: Excluding tractors, volumes in Q4 FY 2024 surged by 20% year-on-year (YoY), driven by a notable two-wheeler recovery and sustained growth in the SUV segment.

Consumer Sector: Within the MOFSL coverage universe, revenue growth in Q4 FY 2024 registered a 4% year-on-year (YoY) increase. While demand trends remained relatively steady, there was a noticeable uptick in rural demand, particularly towards the latter part of the quarter.

Oil & Gas Sector: The performance of the Oil & Gas sector aligned with MOFSL’s projections, primarily driven by the positive contributions from oil marketing companies (OMCs), GAIL India, MRPL, and PLNG. OMCs notably benefited from marketing activities.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.