Nifty Q1 FY25: Auto and Banks Lead, FMCG and Pharma Shine, But Energy and Metals Struggle

In Q1 FY25, the Nifty 50 saw a 4% year-on-year growth, exceeding most expectations on Dalal Street. The NSE benchmark recorded a 5% EBITDA growth, marking the first time it reported single-digit growth in 4 years. The last instance of such single-digit EBITDA growth was in September 2020.

Growth in Q1 FY25 was mainly driven by domestic cyclical sectors, with significant contributions from healthcare, real estate, capital goods, and metals. Oil marketing companies (OMCs) negatively impacted the overall performance. 5 Nifty companies—HDFC Bank, Tata Motors, ICICI Bank, Maruti Suzuki, and TCS—together accounted for 127% of the year-on-year earnings increase. On the other hand, BPCL, JSW Steel, ONGC, Reliance Industries, and Grasim Industries had a negative impact on Nifty’s earnings.

Auto and banks Lead in Q1 FY25

The auto sector outperformed expectations, with most companies showing solid year-on-year growth, except for those in commercial vehicles and tyres. The banking sector also slightly exceeded the brokerage’s cautious expectations despite challenges. These include slow deposit growth, putting pressure on net interest margins (NIMs) and signs of cooling in the unsecured loan segment.

FMCG and Pharma Sectors Rise to Compete

The long-awaited recovery in rural consumption is showing positive signs for the fast-moving consumer goods (FMCG) sector. While price hikes mainly drove earnings growth in FY24, future growth is expected from increased sales volumes. Although rural growth has slowed compared to urban growth over the past 2 years, it has improved year over year.

In the Pharma sector, earnings grew by about 28% year-on-year. However, performance varied within the sector. The US generics business continues to be a major growth driver, while CDMO companies face challenges. Major hospital chains also show early signs of slowing growth and margin pressure.

Energy, Metal, and Cement Sectors Face Margin Pressure

Commodity-based sectors saw slight revenue growth but experienced about a 27% drop in earnings due to margin pressures. The energy sector saw a 30% decline in earnings, mainly due to lower gross refining margins, reduced retail diesel margins for oil marketing companies (OMCs), and weaker performance in Reliance Industries’ oil-to-chemicals segment. Steel and cement companies also struggled, with falling prices for hot rolled coils and cement affecting their profits.

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.