In the world of markets, pauses are just that – pauses. But are we witnessing a temporary halt in India’s market momentum? Bernstein’s latest report delves into this question, examining the pulse of earnings across key sectors.
The demand narrative presents a mixed bag. While certain sectors like IT, Staples, and parts of Discretionary continue to struggle, others, such as Autos, Cement, Real Estate, and portions of Government Capex, are experiencing a slowdown after a robust FY24. Interestingly, Durables, especially ACs, are on an upward trajectory, hinting at a structural story. This trend bolsters our bullish outlook on Durables. Financial sectors echo a similar sentiment with low teen credit growth, mirroring the previous year.
Rural distress remains a pivotal factor influencing earnings. Despite a favorable inflationary environment and stable prices in the FMCG segment, signs of rural recovery are elusive. Autos and Financials echo this sentiment, citing subdued rural demand post-COVID.
Premiumization emerges as a widespread trend, not confined to staples. Sectors like Autos, Real Estate, and even Cement report a shift towards premium offerings, buoying growth prospects.
While domestic macros offer comfort, external challenges lurk. Commodity risks and geopolitical tensions are cited across sectors, with uncertainty clouding export prospects. The anticipation of rate cuts further compounds the cautious outlook.
Despite a healthy FY24, earnings momentum appears to be plateauing. Firms, regardless of their FY24 performance, anticipate a moderate FY25, tempering expectations. This cautionary stance is reflected in recent earnings revisions, which have remained flat across sectors.
FY24 witnessed robust demand across sectors, with notable exceptions like FMCG and apparel. While some firms anticipate a rebound in demand in FY25, others remain conservative, projecting marginal improvements.
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Rural distress persists, impacting various segments including FMCG, Autos, and Financials. Hopes for recovery are pinned on stable prices and normal monsoons.
Premiumization emerges as a growth catalyst across consumer sectors, driving margins amid tepid rural demand.
Firms anticipate stable macroeconomic conditions, with GDP projected to grow in the 6-7% range over the next three years. However, uncertainties in exports linger amidst geopolitical shifts.
While commodity prices…
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