Q2 Season Validates Optimism On D-Street, Says ABSL's Harish Krishnan, Outlines Key Levers Now In Play
Krishnan outlines the key growth levers in play: the tax savings announced in last year’s Budget, the “massive shot in the arm” from GST cuts, and the support from rupee depreciation.
The earnings season has largely validated the market’s optimism, says Harish Krishnan, Co-CIO and Head of Equity at Aditya Birla Sun Life AMC. “In totality, when we look at the quarter that passed, there were more beats than misses,” he notes, adding that the overall trajectory still points to things getting better from here.
This, he says, fits neatly into ABSL AMC’s broader thesis that the market could be heading into a phase of double-digit earnings growth.
Krishnan outlines the key growth levers now in play: the tax savings announced in last year’s Budget, the “massive shot in the arm” from GST cuts, and the support from rupee depreciation. Through it all, India’s macro stability, he stresses, “was never in doubt to us” and continues to hold firm.
He also points to longer-term sectoral trends. In chemicals, he says, the industry has historically delivered 10% super growers over the past 15 years. Consumer durables, meanwhile, remains a segment with a very low profit pool.
September corporate earnings ended on a healthy note, with growth led by OMCs, Telecom, Metals, Technology, NBFC-Lending, Cement, and Capital Goods. In contrast, Oil & Gas (ex-OMCs), Automobiles (dragged by Tata Motors), and Banks (both Private and PSU) weighed on overall profitability.
The Nifty posted 2% annual growth in profit after tax, marking its sixth straight quarter of single-digit earnings growth since June 2020. Five companies including Bharti Airtel, Tata Steel, HDFC Bank, Reliance Industries, and TCS accounted for 300% of the incremental earnings accretion.
Conversely, Tata Motors, ONGC, Coal India, Axis Bank, SBI, InterGlobe Aviation, Adani Enterprises, Power Grid, Sun Pharma, Eternal, HUL, Kotak Mahindra Bank, and Tech Mahindra adversely affected earnings.
The September quarter also saw a favorable beat-miss ratio, with 36% of companies surpassing estimates and 29% missing at the PAT level, as per brokerage Motilal Oswal's coverage universe.
