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Motilal Oswal Report
As the Q1FY27 earnings season gets underway, brokerage firm Motilal Oswal Financial Services expects corporate earnings to remain under pressure from elevated energy costs and the lingering impact of geopolitical disruptions. However, the brokerage believes Financials, Metals, Telecom and select consumption-oriented sectors could offer bright spots amid an otherwise mixed reporting season.
According to Motilal Oswal, earnings across its coverage universe are expected to decline 3% YoY in the June quarter, primarily due to weakness in oil marketing companies. Excluding OMCs, profit growth is projected at a healthy 14%, highlighting the resilience of several domestic sectors.
Financials are likely to emerge as the biggest earnings driver in Q1 FY27. Motilal Oswal expects nomn-banking financial companies-lending companies to report around 27% profit growth, while private and PSU banks could post earnings growth of 10% and 9%, respectively. The brokerage remains constructive on lenders amid healthy credit growth, stable asset quality and improving operating trends.
Metals are another key outperforming segment, with sector profits estimated to rise about 31% YoY, supported by better realisations and favorable commodity prices. Telecom earnings are also expected to improve sharply, aided by Bharti Airtel and reduced losses at Vodafone Idea.
On the other hand, the brokerage expects oil and gas profits to plunge 94% YoY due to anticipated losses at OMCs. Cement, healthcare and automobile sectors may also witness earnings pressure during the quarter.
Despite the near-term earnings headwinds, Motilal Oswal remains positive on India's medium-term outlook. The brokerage expects Nifty earnings to grow around 15-16% annually over FY26-FY28 and believes India's recent market underperformance compared with global AI-driven markets could create opportunities for selective stock picking.
Among its Top Nifty-50 ideas, Motilal Oswal prefers Bharti Airtel, SBI, ICICI Bank, Mahindra & Mahindra, Titan, Eternal, Shriram Finance, InterGlobe Aviation, HDFC AMC and BSE.
Among non-Nifty stocks, the brokerage's preferred picks include TVS Motor, Radico Khaitan, Indian Hotels, RBL Bank, Dixon Technologies, Coforge, Kirloskar Oil Engines, Arvind and Delhivery.
The brokerage believes investors should closely monitor foreign institutional investor flows and the market's ability to absorb a busy IPO pipeline, both of which could influence market direction during the earnings season.
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