Estimates for Q1FY25 suggest a further slowdown in revenue growth and flat-to-marginal growth in overall corporate earnings
Mahavir Lunawat,
Managing Director,
Pantomath Capital Advisors
Mumbai, July 14, 2024: In the first half of this financial year, we witnessed a surge in initial public offerings (IPOs) in the Indian capital market, driven by favorable market conditions, strong economic growth, and steady interest rates.
Primary Market Update
India’s solid economic foundation and positive growth outlook make it an opportune time for its IPO market to flourish.
Notably, both domestic institutional investors and retail investors are actively participating. Over the next few months, 55 companies are gearing up to raise a whopping Rs68,000 crore through IPOs. Next week, the IPO of Sanstar Limited shall hit the street to raise over 500 Crores.
Indian Market update:
The Indian market remained in range so far for the week. Nifty made a lifetime high of 24461.05 levels during the week. The overall outlook for the market remains positive. We have seen certain key sector-specific developments for the week. The railway sector remained in focus as the railway minister made an announcement on the addition of coaches. Railway had announced that about 2,500 new general passenger train coaches are being manufactured and approval has been granted for manufacturing another 10,000 such coaches. Vehicle registrations were largely flat in the month of June as heatwave conditions in several parts of the country forced potential buyers to defer their purchases. SIP Inflow hit an all-time high of Rs21,262.22 crore in June 2024 as against Rs20904 for the preceding month.
Sales of commercial vehicles surpassed expectations driven by strong replacement demand and continued government spending on infrastructure. As per industry estimates, more than 234,000 trucks and buses were sold in the local market in the three months ended June, a 4.5% rise from 224,000 vehicles sold a year earlier. The government reopened the window to apply for the PLI scheme for white goods (Consumer Durables) like air conditioners and LED lights for 90 days. This follows an assessment of the industry’s appetite to make additional investments under the scheme for capitalising on a growing market and increasing local manufacturing of key components for ACs and LED lights. Leading manufacturers such as Voltas, Daikin, Blue Star and Dixon Technologies are evaluating whether to submit fresh applications. All these firms are beneficiaries of the first phase of the scheme.
Q1FY25 earning season is going to begin this week. Estimates for Q1FY25 suggest a further slowdown in revenue growth and flat-to-marginal growth in overall corporate earnings. As far as certain sector earning outlooks are concerned, automobile companies are likely to report strong numbers helped by higher realisations and lower input costs despite slower sales volume growth. Revenue of all major Cement companies may either fall or increase marginally while their net profits grow 6% to 7% in the quarter. FMCG companies are expected to post mixed growth in the June quarter amid heatwave conditions, general elections and sustained inflation. In the backdrop of overall weak consumer sentiment, rural consumption is estimated to have improved marginally during the quarter. Indian Banks are expected to see softer growth in a seasonally weak June quarter. Analysts expect lenders to report earnings growth of anywhere between 14-16% YOY basis on the back of high double-digit credit growth and continued low credit costs. In terms of margins, banks are expected to see mixed trends on account of strong growth in high-cost term deposits.
The full Budget for FY25 will be presented on July 23 this month. Economists batted for continuing the capital spending push to spur growth, fiscal prudence and steps to boost jobs, Boosting capital expenditure on infrastructure and urbanisation, lowering tax rates to boost private consumption and increasing social and rural spending. Industry bodies sought reforms in land, agriculture, capital, power and labour markets, launching an outcome-based employment policy, rolling out incentive schemes linked to jobs, and extending the March 2024 sunset date for low corporate tax on new manufacturing units. Tax incentives, enhanced ease of doing business, and a stable long-term tax regime are among the key suggestions industry and financial institutions made in their pre-budget consultations with finance minister.
Global Market Update:
The US market extended for the week. All these indices are trading at all-time high levels. On the economic data front, Nonfarm payrolls increased by 206,000 for the month, better than the 200,000 forecast though less than 218,000 additions in May. The unemployment rate unexpectedly climbed to 4.1%, tied for the highest level since October 2021. Market participants were betting for an interest rate cut in September following Jerome Powell's comments that the U.S. economy is "no longer overheated." Powell also noted progress on inflation and mentioned that the labour market is "not a source of broad inflationary pressures for the economy now." Investors continue to bet on two rate reductions this year, with the odds for a September cut standing around 75%. While cautious remarks from the Fed Chairman's testimony, in which Jerome Powell stated that a rate cut would not be appropriate until inflation consistently moves toward 2%.
Brent crude prices trading around $85 per barrel. We have seen profit booking on crude for the week. Gasoline inventories declined more than expected for the week. OPEC upheld its forecast for robust global oil demand growth in 2024, particularly in the summer. The EIA anticipates global oil demand to reach 104.7 million barrels per day (bpd) by 2025. As mentioned earlier, it’s trading in the range with geopolitical tension and fear of economic slowdown worry.
