Q4 Results: Finance sector leads the charge

Earnings results are almost over and that has given us an idea about a lot of things. It told us how corporate have performed. Current results have indicated that BSFI have led the charge.

It was reported in the analysis by the business daily Business Standard that record high earnings were witnessed by Indian corporates. However, they were mainly driven by banking, financial services and insurance companies. It was also reported that non-banking companies struggled. The combined net profit of 2,452 listed companies baring BFSI and stock broking fell for third consecutive quarter.

Motilal Oswal also came up with its earnings review report. It stated that despite global macro headwinds profitability of Indian companies has remained healthy in Q4FY23. Brokerage House pointed out that earnings were driven by Financials and Auto. At the same time, metals were not that great performer. For the brokerage’s universe earnings went up 15% (YOY) while that of nifty pack stood at 16%. Auto and Banks were major drivers with earnings increasing 115% and 43%. While metals earnings declined by 45%.

However, going inside the numbers revealed that few companies carried the heavy load. In the brokerage’s universe, just five companies (SBI, Tata Motors, BPCL, IOC and Reliance Industries) have 83% contribution in earnings growth.

Coming to sectors, the brokerage has 21 sectors in its coverage only 6 performed above average. While 8 performed in line and seven sectors missed the beat. In IT sector reported that tier 2 companies witnessed quicker revenue growth.

For the auto sector, baring 2 wheelers, there was broad-based growth in volume (YOY) across the sector.

For banks, growth was driven by health loan growth, stable margins and improvement in asset quality. Brokerage house stated that credit growth has various drivers, growth in retail and MSME sectors is robust while corporate space is rebounding. The consumer sector is considered as mixed bag. For some companies, it was volume growth while some had value-driven growth but brokerage house reported encouraging development on margin fronts.

Looking at the company wise, in terms of PAT (Profit After Tax) out of 228 companies, 102 performed above expectations, 81 missed the beat and 45. All the comparison by Motilal Oswal is as per their estimates.

Now except for these 2 report, there is one more trend. Yesterday we saw had GDP data. The headline numbers were great. Indian GDP grew 7.2% in FY23. Still, growth and consumption in India is happening in K-shape. Rich and well-off people are spending well while the poor and middle class are yet to show significant consumption. So it needs to be seen whether the economy will trickle down, now that inflation goes down and the employment situation improves then it might happen, at the same time rural sector is a concern for the companies be it 2-wheeler or FMCG. There El-Nino can create an issue or delay the recovery.