New Delhi: The fourth quarter of FY24 had a robust performance, demonstrating the resilience and strength of India's business sector, with widespread outperformance across all sectors. The earnings boom, driven by local cyclicals such as autos and financials, as well as healthcare, capital goods, and cement, has injected optimism into the market, despite difficulties from global cyclicals such as metals and oil and gas.
India's Q4 FY24 GDP growth printed at (an unexpectedly high) 7.8% year-on-year (y-o-y). Together with an average 8.3% growth during Q1-Q3, this took the full FY24 growth to 8.2% y-o-y (accelerating from 7% in FY23).
The country's benchmark index, the Nifty 50, saw an astounding 12 percent year-on-year net profit rise. Notably, the remarkable success was supported by the contributions of five Nifty companies: HDFC Bank, State Bank of India (SBI), ONGC, Tata Motors, and Coal India, which together accounted for 72 percent of the incremental YoY earnings growth. Excluding Metals and Oil & Gas, Nifty's earnings surged by an impressive 16 percent YoY.
Earnings per share (EPS) increased significantly in FY24, rising from Rs 980 to Rs 1,005, owing mostly to major improvements in ONGC, Coal India, and SBI. Furthermore, brokerage company Motilal Oswal raised its EPS predictions for FY25E and FY26E to Rs 1,142 and Rs 1,327, respectively, predicting a 14 percent and 16 percent YoY increase in earnings for the corresponding fiscal years.
At present, the Indian economy has been marked macroeconomic circumstances, healthy corporate earnings, rising interest rates, controlled inflation, and continued policy impetus. The BFSI and Automobile industries were highlighted as the key drivers of overall performance, with Healthcare and Capital Goods also showing strong earnings increases.
However, the margin tailwinds in the March 2024 quarter have ebbed from a high base, necessitating a return to revenue growth to maintain earnings momentum. Nifty is now trading at a 12-month future P/E ratio of 19.2x, representing a 6 percent discount to its own long-period average (LPA), signaling potential value for investors.
The success of the Indian corporate sector in Q4 FY24 has boosted investor confidence, indicating a good trajectory for the market in the following quarters. With favorable macroeconomic conditions and positive profit revisions, stakeholders continue to be cautiously optimistic about India's economic development prospects.
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