In the first quarter of fiscal year 2024-25 (Q1FY25), the Nifty 50 index recorded a 4% year-on-year (YoY) growth, slightly surpassing most market expectations. This marked the first time in four years that the NSE benchmark saw single-digit EBITDA growth, last seen in September 2020. According to Motilal Oswal Financial Services, this 4% net profit growth is the lowest since the June 2020 quarter during the COVID-19 pandemic. The quarter’s growth was mainly driven by domestic cyclical sectors, with notable contributions from healthcare, real estate, capital goods, and metals.
However, the overall performance was weighed down by oil marketing companies (OMCs). Five companies—HDFC Bank, Tata Motors, ICICI Bank, Maruti Suzuki, and TCS—collectively contributed 127% of the incremental YoY earnings growth. On the other hand, BPCL, JSW Steel, ONGC, Reliance Industries, and Grasim Industries negatively impacted Nifty earnings.
The auto and banking sectors led the growth in Q1FY25. The auto sector outperformed expectations, except for commercial vehicles and tire companies, which saw moderate growth. The banking sector also exceeded modest expectations, despite challenges such as sluggish deposit growth affecting net interest margins (NIMs) and signs of slowing in the unsecured loan segment.
New trends are emerging, particularly in the FMCG sector, where rural consumption is showing signs of recovery. While last year’s growth was driven by price hikes, the focus is shifting towards volume-led growth. Although rural growth still lags behind urban growth over the past two years, it has improved YoY, while urban growth has slowed.
In the Pharma sector, earnings grew by around 28% YoY, slightly exceeding expectations, though performance varied across the sector. The US generics business continues to be the main growth driver, but CDMO companies face ongoing challenges. Major hospital chains are also beginning to see growth slow and margins tighten.
Commodity-oriented sectors like energy, metals, and cement faced margin pressures, resulting in a decline in earnings despite modest topline growth. Elara Securities reported a 31% YoY drop in earnings for the energy sector, mainly due to lower gross refining margins, reduced retail diesel margins for OMCs, and weaker performance in Reliance Industries’ oil-to-chemicals business. Steel and cement companies were also affected by lower prices.
Despite these challenges, valuations remain high, supported by strong earnings. The outlook is positive for autos, capital goods, FMCG, energy, pharma, and real estate. However, the outlook is negative for cement, chemicals, and metals, and neutral for other sectors. The forecast for capital goods and infrastructure is optimistic as election-related impacts diminish, and above-average monsoon forecasts are expected to boost rural consumption, benefiting the FMCG and small-ticket white goods sectors.
Nifty Updates 2024 (FAQs)
1. What was the growth rate of the Nifty 50 index in Q1FY25?
The Nifty 50 index recorded a 4% year-on-year (YoY) growth in the first quarter of fiscal year 2024-25 (Q1FY25).
2. How does the Q1FY25 EBITDA growth compare to previous quarters?
Q1FY25 marked the first time in four years that the NSE benchmark saw single-digit EBITDA growth, a level last recorded in September 2020.
3. Which sectors contributed the most to Nifty 50’s growth in Q1FY25?
The healthcare, real estate, capital goods, and metals sectors were the primary contributors to the Nifty 50’s growth in Q1FY25.
4. Which companies were the biggest contributors to Nifty 50’s earnings in Q1FY25?
HDFC Bank, Tata Motors, ICICI Bank, Maruti Suzuki, and TCS were the top contributors, accounting for 127% of the incremental YoY earnings growth.
5. What impact did oil marketing companies (OMCs) have on Nifty 50’s performance?
The performance of the Nifty 50 was negatively impacted by oil marketing companies (OMCs), including BPCL, which contributed adversely to the index’s earnings.
6. How did the auto sector perform in Q1FY25?
The auto sector exceeded expectations, with most companies showing decent YoY growth, except for those in the commercial vehicles and tire segments.
7. What challenges did the banking sector face in Q1FY25?
The banking sector faced challenges such as sluggish deposit momentum, which pressured net interest margins (NIMs), and signs of moderation in the unsecured loan segment.
8. What are the growth prospects for the FMCG sector going forward?
The FMCG sector is expected to shift from price-driven to volume-led growth, with rural consumption showing signs of recovery.
9. Which sectors experienced margin pressure in Q1FY25?
Commodity-oriented sectors, including energy, metals, and cement, experienced margin pressure, leading to earnings declines despite modest topline growth.
10. What is the overall market outlook following the Q1FY25 review?
The market outlook remains positive for autos, capital goods, FMCG, energy, pharma, and real estate, while it is negative for cement, chemicals, and metals, and neutral for other sectors.