Foreign-oriented Indian businesses will cushion Nifty 50 earnings in the ongoing fiscal year, according to Jefferies, even as recession worries persist in much of the developed markets.
The Nifty 50 earnings are projected to increase 20% year-on-year on average in FY24, Jefferies said in its June 14 note. That's twice the pace of FY23.
Jefferies estimates "domestic earnings" growth to slow down from 30% in FY23 to 19% in FY24, largely due to a high base. It sees "foreign earnings" growing 21% against a 14% decline in the previous fiscal.
Jefferies' prediction defies worries of global rate hikes to contain inflation depressing demand and sending developed economies including the U.S. and European markets into a recession. A stalling recovery in China, the world's biggest consumer of metals to oil, is another concern.
According to the report, a rebound in metals, and oil and gas is expected to drive foreign-oriented earnings. Metals earnings are likely to grow 22% as selling prices stabilise and costs improve, it said. Oil and gas earnings per share is expected to grow 10% compared to FY23's 8% as crude prices recede, Jefferies said.
Jefferies includes information technology, metals, and oil and gas among "foreign" earnings. It also covers select companies with businesses that generate sales overseas. These include Reliance Industries Ltd.'s oil and gas businesses, Bharti Airtel Ltd.'s Africa segment, Tata Motors Ltd.'s Jaguar Land Rover, and exports for Bajaj Ltd., UPL Ltd., and the pharmaceutical sector.
Consumer staples and automobiles will be the main drivers for domestic earnings, according to Jefferies. Consumer staples companies margins are expected to expand by a 0.7 percentage point as commodity inflation eases. The auto sector could witness a broad-based improvement in margins on better chip supplies and muted raw material pressures.
"Improving supply chains, declining commodity cost pressures, price hikes, etc. are expected to drive margin improvements across all sectors barring IT," said Jefferies.
This margin expansion is expected to contribute to 5-6% growth in earnings, with 63% of Nifty companies (excluding financials) likely to see better profitability in FY24, the report said. Even if the projected margin expansion doesn't come through, EPS is still expected to grow 14-15% year-on-year, the brokerage said.
Singapore's Straits Times Index is the only global peer that is expected to see its earnings grow faster at 23.3%, Jefferies said. While Chinese CSI 300 earnings are likely to grow 14.4%, U.S. S&P 500 bottom line is seen contracting 1.2%, it said.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
