India’s stock market showed remarkable performance in the fourth quarter of FY24, with the Nifty 50 delivering a strong beat and net profit growth of 12% year-on-year (YoY). This growth was driven primarily by domestic cyclicals such as banking, financial services, insurance (BFSI), and autos, while sectors like metals and oil and gas lagged behind.
India’s economy is on the rise, with impressive growth in key sectors driving overall market performance. The Nifty 50, one of India’s premier stock market indices, has showcased robust earnings growth, highlighting the country’s strong economic fundamentals.
Key contributors to earnings growth
Five major companies—HDFC Bank, State Bank of India (SBI), ONGC, Tata Motors, and Coal India—were responsible for 72% of the incremental YoY earnings growth in the Nifty 50.
Sectoral insights
Banking sector
The banking sector reported a robust performance in Q4FY24, driven by strong business growth and controlled provisions. Net interest margin (NIM) performance was mixed, but many banks saw margin improvements. Credit growth was healthy, supported by strong demand in the retail and micro, small, and medium enterprises (MSME) segments.
Public sector banks (PSUs) showed significant improvements in operating performance, with strong growth in net interest income (NII), fee income, and treasury gains leading to healthy profit growth. Nifty Bank’s Year-To-Date return percentage stands at -2.82% as of 4th June 2024.
Auto sector
The auto sector also delivered strong results, with volumes (excluding tractors) growing 20% YoY. The two-wheeler segment saw the highest growth, at 26% YoY. The SUV segment continued its sustained growth, contributing to the overall positive performance of the auto sector. Nifty Auto’s Year-To-Date return percentage stands at 24.57% as of 4th June 2024.
Consumer sector
The consumer sector posted a revenue growth of 4% YoY in Q4FY24. While demand trends were largely stable, many companies saw a recovery in rural areas towards the end of the quarter. Management commentaries for FY25 look promising, with expectations of a volume recovery after a lacklustre demand trend in FY24. Nifty FMCG’s Year-To-Date return percentage stands at -3.18% as of 4th June 2024.
Oil & Gas sector
The oil & gas sector’s performance was in line with expectations, mainly driven by oil marketing companies (OMCs), GAIL India, MRPL, and PLNG. The OMCs’ performance was boosted by strong marketing margins. Nifty OilGas Year-To-Date return percentage stands at 15.33% as of 4th June 2024.
Financial sector
The financial sector, especially banks, showed robust performance with healthy growth in credit and controlled provisions. PSU banks reported strong improvements in operating performance, driven by growth in NII, fee income, and treasury gains. Nifty Financial Service’s Year-To-Date return percentage stands at -3.11% as of 4 June 2024.
Industrials and capital goods
Industrials and capital goods sectors reported significant growth, benefiting from increased infrastructure spending and government initiatives. This trend is expected to continue, contributing to overall economic growth.
Real Estate
The real estate sector remained strong, with continued demand for housing and commercial properties. Government incentives and policies to boost the sector have also played a crucial role in its positive performance. Nifty Realty’s Year-To-Date return percentage stands at 24.65% as of 4 June 2024.
Earnings Per Share (EPS) growth
Nifty earnings per share (EPS) for FY24 increased by 2.6%, from ₹980 to ₹1,005, largely due to notable upgrades in ONGC, Coal India, and SBI. EPS projections for FY25 and FY26 have also seen upward revisions of 0.8% each, to ₹1,142 and ₹1,327, respectively.
The Q4FY24 corporate earnings exceeded expectations, particularly in the BFSI and auto sectors. The healthcare and capital goods sectors also reported healthy earnings growth, further boosting overall performance.
Challenges and considerations
Inflation and interest rates
While the macroeconomic conditions are favourable, inflation and interest rates remain critical factors to watch. Moderate inflation and peaking interest rates provide a supportive environment for growth, but any adverse changes could impact future performance.
Global cyclical
Despite the strong overall performance, global cyclicals such as metals and oil & gas dragged down overall profitability. These sectors faced headwinds that tempered the robust earnings growth seen in other areas.
Conclusion
The Q4FY24 results have painted a positive picture for India’s stock market, with the Nifty 50 delivering impressive earnings growth driven by strong performances in the banking, auto, and consumer sectors. The focus will be on sustaining this momentum through continued investment in key sectors and maintaining favourable macroeconomic conditions.
This is an exciting time for millennials and Gen Z investors to engage with the market and explore investment opportunities in high-performing sectors. As always, staying informed and adaptable to market changes will be key to making the most of these opportunities.
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