Q1 FY25 earnings preview: Nifty 50 net profit may decline quarter-on-quarter; IT sector may post stable to rising margins

Q1FY25 Earnings Preview: With the Indian stock market trading at a record high, all eyes are now on India Inc.’s June quarter (Q1FY25) earnings, which are set to begin this week. IT industry leader TCS is set to release its Q1FY25 results on Thursday, July 11.

The market is at a dizzying level, with an inflated valuation. A solid quarter of corporate earnings is needed to move forward with this kind of valuation. Over the next few weeks, corporate earnings and the EU budget due on Tuesday, July 23, will dictate the market’s course.

Also Read: Budget 2024 Date: Nirmala Sitharaman to present Budget 2024-25 on July 23, session to begin on July 22

Q1 numbers are expected to be grim. Experts believe Nifty 50 earnings may decline sequentially.

“We expect the BSE-30 index net profit in Q1 FY25 to grow by 8.1 per cent year-on-year (YoY) but decline by 8.4 per cent quarter-on-quarter (QoQ), while the Nifty-50 index will remain flat YoY but decline by 10.7 per cent QoQ,” brokerage firm Kotak Institutional Equities (Kotak Securities) said.

The brokerage house estimates the earnings per share (EPS) of the BSE-30 index at ₹3521 for fiscal year 2025 and ₹4063 for fiscal year 2026. Nifty-50 earnings per share are expected to be ₹1093 and ₹1,249 for fiscal years 2025 and 2026, respectively.

Also Read: Indian tech giants’ revenue growth expected to slow QoQ, operating margins to remain stable at 15-18% in Q1 FY25: ICRA

Oil Marketing Companies (OMCs) may report a weak quarter, but several other sectors like automotive, banking and pharmaceuticals may see significant growth in net income year-on-year.

Kotak expects the auto sector to see higher volumes, while banks may see decent growth in NII (net interest income) but slight compression in NIM (net interest margin).

On the other hand, the capital goods sector is expected to show good performance.

Also read: Q1 earnings preview: FMCG sector may see improved volume and value growth trends amid demand recovery

The IT services sector can be characterized by seasonal growth, increased transaction volume, and stable or increasing margins.

Also read: Q1 earnings announcement: From TCS to HCL Tech, sequential improvement in IT sector revenue growth expected

The metals and mining sectors could outperform, while the pharmaceutical sector should see continued stability in the US and increased interest in other markets, Kotak said.

Nuvama Wealth Management expects Nifty 50 earnings to grow 2 per cent year-on-year in Q1FY2025 compared with 16 per cent growth in FY2024.

“With the margin tailwind fading, the top line needs to rebound; failing which, there could be a risk to the consensus EPS growth forecasts for FY2024-2026 of 15-16 per cent. The consensus Nifty earnings forecasts for FY2024, FY2025 and FY2026 are ₹961, ₹1095 and ₹“1,258, respectively,” Nuvama said.

Amit Goel, co-founder and chief global strategist at Pace 360, expects India Inc. to post stable profit year-on-year.

Total net profit of India Inc. amounted to ₹3.41 lakh crore in June 2023. We expect India Inc. to post a total net profit of around Rs. ₹“3.4 lakh crore, roughly the same as in June last year,” Goel said.

Goel believes growth could be marginally slower than the previous quarter due to factors like dependence on monsoons and infrastructure moves.

“The IT sector may see some stagnation and some companies may even see a decline. Bank credit growth is expected to be healthy but NIMs may be under pressure. Public sector banks (PSUs) may outperform private lenders. Nifty EPS estimates are expected to see a marginal increase but the decline in the technology sector may be offset by improvements in banking, financial services and insurance (BFSI) and autos. Overall, a moderate quarter is expected. Growth may have bottomed out compared to the previous quarter but no significant gains are expected yet,” Goel said.

Gaurang Shah, Senior Vice President, Geojit Financial Services, feels it is difficult to upgrade or downgrade the Nifty rating.

“It is better to look at more solid, long-term data and then decide where Sensex and Nifty are heading in terms of upside potential, keeping in mind the potential for long-term profit taking across sectors,” Shah said.

Shah expects the new fiscal year to start with a decent profit growth, which could give a positive outlook considering the rest of the numbers for the second, third and fourth quarters.

Shah places greater emphasis on upcoming budget.

“If the finance minister has something better to offer in the budget in terms of better transparency of profits, that can be an added advantage. So it is better to look at sustainable, long-term profits rather than at the quarterly level,” Shah said.

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