New Delhi [India], January 11 : The JM Financial coverage universe is poised to report a 5.8 per cent year-on-year (YoY) growth in profit after tax (PAT) for the third quarter of FY25, driven by robust performances in IT services and pharmaceuticals.
The report stated, "This quarter will be impacted by furloughs; its impact will be similar to that last year. This is not encouraging given furloughs were deeper and longer last time around. Discretionary spend environment continues to be muted. It is restricted to a few pockets still. 3Q performance is, however, not a reflection of underlying demand. Client budgets, deal wins and uptick in short duration deals would be better gauges."
It further added, "We expect cross currency headwinds in the quarter, USD's strength against basket of currencies will lower USD print. We estimate cross currency impact between -1.3 per cent - 0.1 per cent for coverage companies."
In 3QFY25, sectors like IT services (+9 per cent YoY), infrastructure (+21 per cent YoY), industrials (+11 per cent YoY), pharmaceuticals (+13 per cent YoY), and telecom (+40 per cent YoY) are expected to drive PAT growth.
Emerging segments like electronics manufacturing services (EMS), consumer durables, hotels, and real estate are also forecasted to deliver robust YoY growth. However, traditional heavyweights such as oil & gas (-4 per cent YoY), utilities (-15 per cent YoY), metals & mining (-8 per cent YoY), and consumer staples (flat YoY) are likely to underperform.
However, excluding the banking, financial services, and insurance (BFSI) sectorwhich accounts for 32 per cent of the universethe PAT growth moderates to a subdued 1.9 per cent YoY.
The Indian equity market has experienced a challenging period during 2QFY25 and 3QFY25, marked by slower urban consumption, weaker-than-expected capital expenditure (capex), and rising stress in unsecured lending books.
For the nine-month period ending December 2024 (9MFY25), overall growth is expected to be 4.4 per cent, raising downside risks to the FY25 EPS growth forecast of 5.1 per cent.
The Nifty50 index has declined 10 per cent from its peak in September 2024, driven by several factors, including slowing demand, earnings cuts, and an unfavorable macroeconomic environment.
Foreign institutional investors (FIIs) have offloaded Indian equities worth USD 11.8 billion in 3QFY25, significantly impacting sectors such as oil & gas, auto, and BFSI.
Meanwhile, domestic institutional investors (DIIs) partially offset this outflow by infusing USD 22.1 billion into the market. The global shift in investor sentiment towards the US, fueled by Donald Trump's presidential election victory and expectations of a stronger US economy, has further pressured Indian markets.
The BFSI sector, which contributes significantly to overall earnings, is anticipated to post muted growth due to slowing credit and deposit growth and rising credit costs in unsecured lending.
Larger private sector banks are expected to perform better than smaller players due to their robust balance sheets. Meanwhile, non-banking financial companies (NBFCs) are likely to see mixed results, with microfinance institutions facing high credit costs and housing finance companies maintaining steady growth.
The "Sell India, Buy China" trend that emerged in September 2024 further intensified the pressure on Indian markets. China attracted USD 96 billion in FII inflows following stimulus measures, while Indian equities faced valuation concerns with a 1-year forward P/E above historical averages.
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