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Fuel retailers and automobile companies are anticipated to drive a rise in profits during the upcoming Q2 earnings season. Analysts predict that oil marketing firms will lead the way, with other sectors like banking, capital goods, commodity chemicals, construction materials, and metals and mining also expected to report strong annual earnings growth for Q2FY24.
This boost in profits is attributed to robust domestic demand, while technology stocks are expected to show more subdued growth.
Motilal Oswal Financial Services forecasts that the 50 companies constituting the Nifty index will post a 21% increase in earnings for Q2, while Kotak Institutional Equity anticipates a 24% growth rate.
In the mid-cap segment, companies under MOFSL's coverage are collectively projected to achieve a remarkable 104% growth in earnings, while small-cap companies are expected to record an even more impressive 130% growth. However, due to the strong performance and high valuations of mid-and small-cap stocks, MOFSL analysts have refrained from increasing their investments in these categories.
Banks are expected to exhibit relatively weaker operating profit growth, but their earnings growth remains well-supported by lower provisions, according to a Kotak report. "Preliminary data from a variety of banks suggests that loan and deposit growth has remained solid."
Most non-banking financial companies (NBFCs) are likely to report robust quarter-on-quarter loan growth, as lending momentum persists and new business lines are added. Some may experience margin compression due to rising borrowing costs, but this could be partially offset by rate hikes, the report suggests.
MOFSL analysts have reiterated their preference for financials and public sector banks, citing reasonable valuations and healthy asset quality. They are also bullish on healthcare stocks and have positive sentiments towards industrial giants like L&T and Bharat Electronics.
In contrast, KIE expects IT companies to report single-digit net profit growth in Q2FY24, while fertilizer and agrochemical companies are projected to witness a sharp decline in growth.
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