In a note Wednesday, JPMorgan analysts shared the firm’s India equity strategy heading into Q4 earnings which are expected to be driven by Financials, Auto and Healthcare. The firm expects moderate top-line growth of around 4% for the Nifty, and margin expansion of around 77 bps QoQ for the Nifty versus around 175 bps for their coverage universe.
“Near term, our sector allocation remains aligned largely with domestic cyclical plays amid positive earnings momentum and superior economic growth,” said the analysts.
Accordingly, the firm is bullish on Financial, Real Estate, Auto and Healthcare.
For Nifty companies, JPMorgan expects the YoY growth in aggregate Revenue/Ebitda/PBT/PAT of 4%, 10%, 8% and 8% respectively, and median growth of 7%, 10%, 15% and 8% respectively. For companies covered by the firm, they expect growth of 0%, 13%, 15% and 8%, respectively, and median growth of 10%, 14%, 19% and 14% respectively.
A strong print in Q4 earnings of Financials will be driven by seasonality, better credit, higher non interest and scope for one-offs including AIF provision reversals and one-off gains, noted the firm. A likely headwind to growth in the sector will be lower incremental LDR and JPM expects a rise in unsecured loan credit costs, though these will impact smaller banks and NBFCs more.
On IT services, JPMorgan observes that demand has moved sideways after reaching a bottom last year, and the scenario is unlikely to change this year.