New Delhi
The corporate earnings momentum has improved significantly since FY20. Earnings have surprised on the upside in the recent past, driven by an improvement in margins, foreign brokerage Nomura said to the sources. We are constructive on earnings growth in the medium term supported by government policies and its impact on macro factors. The earnings-to-GDP ratio can continue to improve, it added.
The corporate earnings-to-GDP ratio, which has recorded a consistent decline since the Global Financial Crisis (GFC), has rebounded since FY20. Most segments, particularly the commodity-consuming manufacturing sector, have recorded strong growth since FY20, Nomura said.
In an analysis of a set of 232 companies (referred as BSE 200+), which are part of the BSE 200 index and coverage universe, net earnings recorded 30 per cent y-o-y earnings growth.
Excluding financials, commodities and telecom, where earnings tend to be volatile, the aggregate earnings growth was strong at 22 per cent y-o-y. The earnings momentum has improved in the recent past as the four-year CAGR between 3QFY20-24 is at 32.3 per cent, vs 2.9 per cent between 3QFY16-20.
The market expects the Nifty 100 index to record 28.4 per cent earnings growth in FY24E aided by strong profits in the oil and gas sector and financials. Financials will contribute 38 per cent to the incremental earnings of the Nifty 100 over FY24-26E, as per consensus estimates. Earnings growth is expected to moderate across most sectors over the next two years vs FY24 owing to a high base, the research said.
