The stock market has recently been marked by volatility, with a significant downward correction of nearly 12% from its all-time highs. On Monday, February 17, 2025Dalal Street saw a struggle, as the Sensex dropped almost 700 points, while the Nifty slid by nearly 200 points. Despite some recovery later in the day, the Sensex remained down by 200 points at the time of writing. This dip in the market is largely attributed to disappointing Q3 earnings from India Inc, which have dampened investor sentiment.
According to a report, the Q3 earnings season was the weakest for India Inc since the first quarter of FY21. The Nifty reported a 5% year-on-year (YoY) growth in profit after tax (PAT) for the third consecutive quarter, highlighting a slowdown in earnings growth. The report indicated that earnings growth was primarily driven by the banking, financial services, and insurance (BFSI) sector, which contributed positively, along with technology, telecom, healthcare, capital goods, and real estate sectors.
However, despite the positive contributions from these sectors, overall growth was subdued. The BFSI sector recorded an 11% YoY increase in earnings, with public sector banks performing particularly well, showing a 24% YoY growth. Other sectors like technology (9% YoY), telecom (₹900 crore profit compared to a ₹3,500 crore loss), healthcare (25% YoY), capital goods (20% YoY), and real estate (60% YoY) helped support the overall earnings.
On the other hand, some sectors saw a decline in earnings, contributing to the overall subdued growth. The oil and gas sector experienced an 11% YoY decline in profits, mainly due to a fall in earnings of oil marketing companies (OMCs), which recorded an 18% drop in profit. Other struggling sectors included cement, with a 55% YoY drop in earnings, chemicals (12% YoY decline), and consumer goods (5% YoY decline).
The report also noted that a significant 44% of the companies surveyed failed to meet earnings expectations, while only 28% reported better-than-expected profits. The ratio of earnings upgrades to downgrades for FY26 estimates has weakened, with 137 companies seeing downgrades of more than 3%, compared to just 37 companies that had their earnings estimates raised by over 3%.
The correction in broader markets is seen as a reflection of these potential disappointments in future earnings. While the banking sector saw robust growth between FY19-24, with a 55% earnings growth, the momentum is slowing down. FY25 earnings growth for banks is expected to be around 14%, lower than previous years. Earnings growth forecasts for FY26 are even lower, at 9%.
The stock market’s struggle amid weak earnings results from India Inc underscores the cautious sentiment among investors. With several sectors facing declines, and with corporate earnings growth expectations facing downward revisions, market participants are watching closely as the outlook for the coming months remains uncertain.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Feb 17, 2025, 9:19 PM IST
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