Q3 Earnings Mid-Season Review: Energy, IT Lead While Financials Lag, Says BofA

As the third-quarter earnings season progresses, 43% of the Nifty’s free float market capitalisation has reported results, with earnings largely tracking in line with expectations, according to a note from Bank of America on Friday. The performance has been mixed, with sectors like IT and energy showing robust growth, while financials have underperformed.

Notably, five of the 13 companies have reported earnings beats, including major players like Reliance Industries Ltd. and SBI Life Insurance Co., with results slightly surpassing expectations from the third-quarter preview.

Sector-wise, the IT and energy sectors have delivered respectable performances, with IT posting a 10% year-on-year growth and energy achieving a 9% growth.

In contrast, financials have underperformed, showing just 4% growth, BofA said. Excluding the financial sector, the Nifty is tracking over 5% year-on-year topline growth, with earnings increasing by over 8% year-on-year and over 5% quarter-on-quarter, driven by strong performances from companies like Infosys Ltd. (12% year-on-year growth) and Reliance (7% year-on-year growth).

Nifty’s operating income, excluding the financial sector, has shown a healthy increase of over 8% year-on-year and over 9% quarter-on-quarter, a notable improvement from the previous two quarters, which had negative contributions.

Despite these positive results, earnings momentum for the quarter ending December remains weaker, compared to the robust growth seen in financial year 2024, with earnings tracking an 8% year-on-year growth, according to the brokerage.

At the NSE200 level, 35% of the free float market cap has reported so far, tracking a marginal 1% miss on earnings expectations. Energy (9% year-on-year growth) and IT (8% year-on-year growth) have performed well, while financials have shown stronger-than-expected growth at over 10% year-on-year. Overall, NSE200 is tracking a solid 10% year-on-year earnings growth.

Given ongoing FII selling pressure and a focus on commentary, the market is likely to react strongly to any marginal misses. In the coming weeks, more results will be reported, with a focus on financials, industrials, and later, staples, telecom, and discretionary sectors.