Indian Inc reported disappointing performance for the September quarter (Q2FY25), with several companies posting weaker-than-expected results. This disappointing performance caused a sharp sell-off in stock markets, raising concerns among investors about a possible slowdown in the Indian economy.
The weak earnings have also dampened the sentiment of foreign investors, who have become increasingly bearish on the Indian market. Foreign portfolio investors (FPIs) have ruthlessly withdrawn money in recent months, signaling declining confidence in the country’s economic growth prospects.
The combination of weak corporate earnings and persistent FPI outflows has increased market volatility, pushing frontline indices into correction territory and trading at their lowest levels in several months.
In addition, brokerage firms have lowered their earnings expectations and are targeting multiples for the majority of stocks, which has added a new layer of uncertainty to the markets and contributed to a sharp erosion of investor wealth.
Nearly half of companies miss estimates
JM Financial’s analysis of second-year 25 results shows that 45% of companies within the coverage universe missed profit expectations.
“We analyzed the results of 227 companies (from JM Financial’s 275-company coverage universe) and found that 45% of companies missed estimates,” the brokerage said.
The report highlighted significant underperformance in sectors such as MFIs and Oil Refining & Marketing, where all companies failed to meet expectations. Similarly, sectors such as consumer discretionary, SFBs, auto OEMs, city gas distribution, telecom, building materials and retail saw a large number of profit losses, reflecting broader challenges.
On the other hand, PSU Banks, helped by lower credit costs, and Steel and Mining, benefiting from favorable commodity prices, showed robust results with more than 70% of companies exceeding expectations. The internet and pharmaceutical sectors also performed well, the report said.
The brokerage also analyzed the consensus EPS and post-results target price revision for its universe of 275 companies. It found that 66% of companies faced earnings per share downgrades for FY25, with 40% seeing cuts of more than 3%, 29% of more than 5% and 18% of more than 10% . In addition, 45% of companies experienced target price reductions following FY25 results.
Mid-cap and small-cap companies were particularly affected, with 17% of mid-caps and 23% of small-caps seeing earnings per share decline by more than 10%, compared to just 10% for large caps.
“There is a slowdown in urban demand among FMCG, retail, automotive and shopping center operators. In addition, chemicals, consumer durables and building materials have seen a moderation in demand. MFIs, select private sector banks and NBFCs are witnessing stress in the sector. their unsecured books,” said JM Financial.
Disclaimer: The views and recommendations expressed in this article are those of individual analysts. These do not represent the views of Mint. We recommend that investors consult certified experts before making any investment decisions.
