Among key trends observed during the quarter, in domestic consumption, the gap between high-end and mass market demand narrowed with stronger segments such as passenger vehicles, hotels and jewellery slowing. FMCG, on the other hand, stabilised and durables posted a strong quarter owing to the heatwave, the Nuvama note said.
Real estate companies reported a reasonable quarter, whereas cement companies had a forgettable one with top line as well as EBITDA/t contracting YoY. With regard to industrials, demand moderated to sub-10% versus 15% recorded in FY24, though margins held up at record highs. “This may not be sustainable, posing earnings risks ahead,” the note cautioned.
Pharma companies posted a good quarter while IT companies’ earnings and topline stabilised while that of auto exporters weakened. Nuvama expects exporter earnings (barring autos) to stabilise going ahead, though it has its reservations on the recovery front.
Pharma stocks have had a good run on the exchanges over the last one month riding on Q1 earnings and their defensive tag coming into play amid market uncertainties. The Nifty Pharma index has gained over 6% in the past one month as against Nifty, which has declined by 0.30%. Meanwhile Nifty IT has surged over 4% in this period.In the financials, net interest margins (NIMs) of banks stabilised at low levels though credit costs increased from very low levels. Corporate commentary alluded to early signs of rising stress in the retail sector. On the other hand, non-lending financials reported a blockbuster quarter, the report noted.In the commodity segment, profits remained subdued, especially for oil & gas companies, as GRMs weakened. As for ferrous companies, they too faced earnings headwinds, although non-ferrous companies reported a good quarter, Nuvama said, expecting weakness in commodity earnings going forward.On a broader level, Q1FY25 for BSE500 (ex-OMC) topline and PAT each grew 8–10% unlike in FY24 when PAT grew 21%, far outpacing the top-line growth 8%. This is owing to fading tailwinds from lower input prices and BFSI credit costs while demand remained weak.
Nuvama remains overweight on consumer, private banks, insurance, telecom, IT and pharma while underweight on industrials, autos, metals and PSUs.
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