Indian Companies Forecast 20% Profit Growth for September Quarter
Indian firms are projected to post accelerated profit growth in the September quarter, with Nifty 50 companies expected to see net profits rise about 20% year-on-year. This comes despite sector divergence, global headwinds, and foreign investor outflows.
Indian companies are projected to achieve accelerated profit growth during the September quarter despite various challenges affecting different sectors. Nifty 50 firms' net profit is forecast to rise about 20% year-on-year on average, based on estimates from five brokerages.
Sector performance divergence
Profit growth is expected to accelerate even as performance is likely to be uneven across sectors due to global and local headwinds. Global uncertainties are likely to affect individual sectors differently. The Middle East conflict has fuelled inflation concerns globally, raising the risk premium on emerging market economies and equity markets. Foreign investors have pulled out of Indian stocks at a record pace, pushing the benchmark Nifty 50 towards its worst year in 15 years.
Brokerage consensus and trends
This anticipated growth follows a strong previous quarter. In April-June, Nifty 50 net profit hit a 10-quarter high of 18% following three quarters of low-single-digit growth. One brokerage, Motilal Oswal, forecasts a 27 per cent increase, which would be the fastest in 17 quarters. PhillipCapital expects a more modest 13% rise in net profit.
| Brokerage | Net Profit Growth Forecast | Key Notes |
|---|---|---|
| Consensus (5 brokerages) | ~20% year-on-year | Average for Nifty 50 firms |
| Motilal Oswal | 27% | Fastest growth in 17 quarters |
| PhillipCapital | 13% | Reflects margin pressure |
Key drivers and sector outlook
Most analysts back financials to be the principal earnings anchor. Healthy loan growth, lower credit costs, and fewer loans turning bad at banks support this outlook. Following the Reserve Bank of India's rate hike and its shift to a 'calibrated tightening' stance, large private banks are expected to see further earnings upgrades. Multiple brokerages say earnings from ICICI Bank, State Bank of India and Bajaj Finance would stand out.
J.P.Morgan analysts led by Rajiv Batra said: "resilient domestic demand in Q2, early festive inventory build-up, favourable pricing in selective commodity-linked sectors should continue to support earnings growth." Automobile retail sales rose during the quarter on improved product mix, pricing and tax cuts. Motilal Oswal is bullish on automobiles and new-age tech platforms, picking Meesho, PhysicsWallah, Mahindra & Mahindra and TVS Motor, on structural growth trends, recovering discretionary demand and expanding product portfolios.
Headwinds and pressures
Not all sectors share this optimism. IT demand may remain subdued as clients delay non-essential spending amid AI-driven pricing pressure. Geopolitical concerns and weak economic conditions are also cited as reasons for subdued IT demand. Nuvama said: "We expect management commentaries to reflect the multi-pronged challenges the sector faces - geopolitics, weak macro and AI threat." Kotak Institutional Equities expects commodity headwinds to drag operating margins.
Higher crude prices are a double-edged sword. Effects of the US-Iran war, now in its eighth month, are likely to be felt sharply across automobiles, energy and consumer goods, as oil from the region struggled to get through to India, raising costs. Higher crude prices are likely to favour upstream and oil-to-chemicals companies, while pressuring oil marketing firms. Reliance Industries, an oil-to-telecom conglomerate and operator of the world's largest refining complex, is expected to benefit from higher crude prices, tiding over a relatively softer retail performance. A weakest-in-a-decade monsoon has also raised rural demand concerns. Tata Consultancy Services will kickstart the earnings season later in the day.
