Nifty earnings, excluding corp banks to see 5% decline in Q1: Gautam Duggad


Mumbai: Nifty earnings excluding the corporate banks may see a 5 per cent decline in the June quarter, according to Gautam Duggad, head of research- institutional equities at Motilal Oswal Securities, led by a slowdown in earnings for metals and auto pack. 

“If you see the Nifty earnings for the last two quarters also excluding the corporate banks the Nifty earnings were flattish,” Duggad said on ET Now. 

“This time we are expecting actually a 5% decline because of the pain in some of the other big sectors like automobiles and also metals now because last two years as we have been pointing out global cyclicals like metals and oil and gas have driven the earnings,” he said. 

“Post the second half of FY19 that trend has dislocated, and we have been highlighting this that metals will get into earnings decline more. In this quarter our expectation is almost a 40% YoY earnings decline for the metals,” he added. 

Duggad pointed that the quarter, as has been the trend in the last few quarters, will be predominantly led by financials. 

“As far as Q1 results are concerned, our expectations are that it will again be a quarter predominately led by financials and this is what we have been seeing from last two quarters. Q3, Q4 FY19 were also dominated by financials so will be the case for Q1 FY19 and if I can add even for the entire FY20 also,” he said. 
For the quarter, Duggad sees a 8% net profit growth and said ex of financials there will be a decline both for Nifty as well as for the brokerage’s broader universe. 

For Nifty, he is expecting 10% growth, while excluding the three corporate banks the Nifty will see a 5% earnings decline. 

He believes private banks will have very strong quarter because of strong recovery in Axis BankNSE 0.42 % and ICICI BankNSE 0.61 % and continued strong performance from midcap private banks. 

“So our expectation for private bank is close to 38% earnings growth with very strong performance coming in from Axis and ICICI and roughly 32% to 44% growth in midcaps like Federal Bank, RBL, AU Finance, even Equitas for that matter, he said. 

He believes HDFC BankNSE -1.26 % may show its usual trend growth of somewhere between 20-22 per cent, but sees a muted quarter for Kotak Mahindra BankNSE -0.84 % as well as Yes Bank. 

“As far as NBFC is concerned, our expectation is somewhere around 15 per cent-16 per cent growth again led by Bajaj Finance where we are expecting more than 40% growth and HDFC which is showing a very strong performance because of gains from the Gruh deal,” he said. 

“So aside of those two names you will find sequential slowdown in NBFCs whether it is disbursement growth or AUM growth. One trend which is coming out clearly is that auto financials are showing some improvement in asset quality whereas as far as home financiers are concerned, you are seeing clear stress on their disbursement growth rate,” he added. 

For the quarter, NBFCs will see around 14-15 per cent growth but again led by just two companies, he pointed. 

“For PSU banks, the base is very favourable to them. This quarter our expectation is somewhere around 5000 crores of profit. So SBI (State Bank of India) is itself expected to do close to 4800 crores of profit. So PSU banks are actually singularly responsible for the YoY optical growth that you are seeing in whether it is Nifty or for that matter over broader universe,” he added.