Coforge, HPCL, United Spirits Among Stocks To Outperform Despite Q3 Results Misses, Says Jefferies

With more and more Indian corporates posting lower-than-expected numbers in the December quarter, Jefferies sees companies across sectors outperforming on their result day despite weak earnings. The brokerage believes the earnings miss has already been factored in these stocks.

"While these stocks could still miss, if the pattern seen during the previous result season repeats, these stocks could on average outperform on the results day," it said.

Stocks in this list include Amber Enterprises India Ltd., KFin Technologies Ltd., Max Healthcare Institute Ltd., Chalet Hotels Ltd., Macrotech Developers Ltd., Coforge Ltd., Hindustan Petroleum Corp., United Spirits Ltd., Sonata Software Ltd., Poly Medicure Ltd., Jubilant FoodWorks Ltd., Persistent Systems Ltd., Mankind Pharma Ltd., and Syngene International Ltd.

On the flipside, Jefferies has also identified stocks likely to underperform on the result day even with the company posting better than expected results. These stocks have already outperformed significantly ahead of the results.

These include Indus Towers Ltd., Biocon Ltd., Alivus Life Sciences Ltd., Equitas Small Finance Bank Ltd., Bank Of India Ltd., Aarti Industries Ltd., Maruti Suzuki India Ltd., NTPC Ltd., Welspun Living Ltd., AU Small Finance Bank Ltd., Citi Union Bank Ltd., IDFC First Bank Ltd., Navin Fluorine Ltd., Container Corporation of India Ltd., and SBI Cards and Payment Services Ltd.

The brokerage believes that the stocks have been under pressure since the start of the 2QFY25 results, when only 40% beat expectations. "Revision trends suggest that 3QFY25 season is unlikely to see a big turnaround," it said. "Indeed, it's been an ominous start with a lot more companies missing so far."

Domestic investors are indicating a shift away from cyclicals. The brokerage noted that long-only funds are most 'overweight' on banks, auto and pharma and most 'underweight' on materials, financial services, and FBT (food, beverages and tobacco) stocks. The biggest change has been the shift from 'overweight' to 'underweight' in the capital goods sector.

Some of the macro headwinds impacting December quarter results are a strong dollar, delayed rate cuts, tariff scare created by Donald Trump, and cyclical slowdown in India's GDP growth. Meanwhile, another pick-up in foreign outflows, high new paper supply, persistent downgrades, and mid-single-digit growth this fiscal are also weighing on investors' sentiment.

"The market itself has severely penalised momentum and growth stocks on an year-to-date basis, indicating ongoing rush towards safety and past underperformers," the brokerage said.