Nifty 50 To Post Growth Of 10.5% Earnings Per Share In FY25, Aditya Birla Sun Life AMC Says

Earnings per share growth of NSE Nifty 50 companies will likely rise by 10.5% on the year during financial year 2025, according to Aditya Birla Sun Life AMC Ltd. in its 2025 outlook report. Earnings of the Nifty 50 companies are expected to grow in low-to-mid teens over FY25-27E before reverting back to 11–12%.

For BSE 100 companies, the asset manager penned mid-to-low teen earnings growth for financial year 2025.

Aditya Birla Sun Life AMC said calendar year 2025 would be a year of consolidation. Corporate profit in India will likely normalise to GDP. In the last four years, corporate profit grew faster than topline because of the shift from unorganised to organised, deleveraging of balance sheet, and loss-making companies turning profitable. Now, moving forward, profit growth will converge with topline.

In October 2024, foreign fund outflows from domestic equities showed the worst pace since the pandemic. However, December witnessed some recovery, while FIIs are net positive for the year, the Aditya Birla Sun Life AMC said. For India, risk could be lower because India's relative positioning in FPI portfolios is down to the lowest in more than a decade. Notwithstanding EPS cuts, a market rebound is expected when FII selling abates, the note said.

Large-cap valuations are reasonable in the setting of expected consolidation in the market. The Nifty 50 companies' valuation is around 7% premium to their long-term historical levels on one-year forward PE basis. Meanwhile, mid-cap and small-cap trades are at 41% and 45% premium, respectively.

Large-cap companies are also offering better risk-reward. The market cap share of large caps is at a two-decade low. Profit pool share of large-caps went up from their low of June 2022. Compared to large caps, the market cap of mid, small, and micro caps has crossed the December 2017 highs, which implies a two-decade high, but it has tumbled from the June 2022 highs.

As far as sectors are concerned, Aditya Birla Sun Life AMC sees above average growth in metals, cement, realty, and retail. Below average growth is expected in FMCG, autos, power, and financials.

Aditya Birla Sun Life AMC turned constructive on private banks after being negative on them for last 18 months, as an anti-consensus call. The reason is private banks' market-cap is at the lowest level compared to their profit pool share. Strong structural reforms at place.

The IT sector is up for a gritty revival, according to the brokerage. The profit pool share of the IT sector has come down from 14% seen during Covid times to about 8%, which is close to the levels seen in 2011-12. Compared to pre-pandemic levels, offshoring has gone up, which is typically margin accretive.

Aditya Birla Sun Life AMC expects investment and profitability of corporates in the US to rise in the backdrop of US President-elect Donald Trump's policies. Over time, margin recovery is expected.