Corporate earnings for the war-hit June quarter are expected to remain resilient despite a sharp rise in energy and commodity prices. Exporters are likely to have benefited from the weaker rupee, although industries dependent on oil-based inputs would have faced higher costs. With consumer demand holding up, aided by GST cuts and income tax relief, many companies also took calibrated price increases to protect margins.
Net profits of Nifty 50 companies are expected to rise by just under 10% year-on-year. For the BSE Sensex companies, however, profit growth is likely to be a more modest 5%, according to estimates by Kotak Institutional Equities (KIE).
Metals and mining, automobiles, non-banking financial companies (NBFCs) and telecom are expected to drive overall earnings growth. In contrast, sharp losses at oil marketing companies (OMCs), stemming from inventory and marketing losses, will weigh on aggregate numbers. Construction materials, pharmaceuticals and transportation are also likely to drag on earnings, while the IT sector is expected to report a subdued quarter.
Auto and Consumer Goods
Automobile companies are expected to post robust revenue growth of 17-18% year-on-year, supported by price hikes, an improved product mix and lower discounts. Export-oriented manufacturers should also benefit from the weaker rupee. However, elevated raw material costs are likely to keep operating margins largely flat or lead to a marginal contraction.
Consumer goods companies are also expected to report healthy numbers. Timely price increases, lower-cost inventory and market share gains from the unorganised sector should support both revenue growth and margins. Companies such as Dabur and Godrej Consumer Products have indicated that consumer demand remains resilient. Makers of discretionary products are similarly expected to benefit from price increases and better operating leverage. Retailers, including Avenue Supermarts, are understood to have delivered healthy revenue growth.
Cement producers are estimated to have recorded volume growth of 7.5-8.5%, aided by capacity additions and a favourable base. Realisations are expected to have improved 4-4.5% sequentially, adjusted for the GST rate cut. Capital goods companies are also likely to have reported a strong quarter, with revenues rising 15-25% year-on-year on the back of healthy execution.
Seasonality Fails
Despite being seasonally the strongest quarter for IT services, the sector is expected to post muted growth. Revenue is likely to be affected by the West Asia conflict, higher productivity pass-throughs in managed services contracts and GenAI-led pricing pressure. The weaker rupee should partly offset these headwinds and help preserve margins, except at companies that implemented wage hikes during the quarter.
Provisional data from banks indicate healthy loan growth, although net interest margins are expected to remain under pressure amid intense competition. Analysts say there is little evidence so far that the West Asia conflict has affected asset quality. NBFCs are expected to post another strong quarter, driven by healthy demand across personal loans, vehicle finance and affordable housing. Net interest margins are likely to improve on a favourable base, while asset quality is expected to remain stable.
The biggest drag on overall earnings will come from OMCs. The sharp spike in global crude oil prices during the quarter, coupled with limited pass-through to retail fuel prices, is expected to result in substantial inventory and marketing losses. The government has estimated the combined hit to the three state-owned OMCs at around ₹75,000 crore.