India's corporate earnings for the June quarter of FY27 grew by 4% compared to last year, according to Nomura Global Markets Research. This growth beat expectations and was driven by factors like tax cuts and increased liquidity. The earnings growth for Nifty 50 companies surpassed estimates by 1%.
Key Details
When excluding the oil and gas sector, which faced major losses, normalized earnings for 256 companies rose by 20% year-on-year. This also exceeded Bloomberg's consensus estimates by 5%. However, overall market sentiment remains cautious. The MSCI India index is down 2.6% for the year, making it the least favored stock market in Asia, according to the August BofA Securities fund manager survey. Weak economic growth, high valuations, and limited exposure to artificial intelligence are contributing to this pessimism.
Background
Pratik Gupta, chief executive at Kotak Institutional Equities, said that recent measures by the Reserve Bank of India could help. However, they may not fully offset the risks from rising crude oil prices on India's external account. He noted that the quality and breadth of earnings are important to monitor. Much of the profit growth comes from commodities and sectors facing global markets rather than domestic demand.
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The mixed earnings outlook may affect investor sentiment in the Indian equity market. Large-cap stocks might attract more interest than small- and mid-caps. Rising crude oil prices could further challenge India's macroeconomic stability, impacting sectors sensitive to oil costs.
Investors will be looking for upcoming economic data and corporate earnings reports. These could provide clarity on the growth trajectory for FY27.
Based on reporting by: livemint.com