Analysts and market experts are worried about a slowdown in the Indian economy after disappointing second-quarter results. Of the nifty 50 companies, 41 top nifty firms have already announced their Q2 results, and to everyone’s surprise, 22 of these 41 reported earnings lower than the estimates. Even ten of these companies reported revenues below estimates, which is more disappointing and worrying at the same time. Even the 18 that reported earnings above the estimates, six of them have revenue below estimates.
Biggest Blows to the PSU Giants
The public sector giants such as NTPC and Coal India received the biggest blows as their earnings differed the most from the expected figures. The projected net profit of NTPC for Q2 was around Rs. 5035 crore, while the actual ntpc q2 profit was Rs. 2655 crore for the quarter. This is almost half of the anticipated profit which took a real toll on the NTPC investors. Even the power giant reported a revenue lower than the expected figure. While it was projected that NTPC would generate revenue of around Rs. 47007 crore in Q2FY25, it only generated Rs. 44696 crore.
Similar to NTPC’s profit, Coal India also reported a net profit of Rs. 6138 crore against the projected net profit of Rs. 8055 crore while its revenue dropped from the expected Rs. 30481 crore to Rs. 27271 crore.
Apart from these PSUs, there are other Bluechip companies as well that missed out on the Q2 estimates, and here is a precise list of the ten that missed the targets by highest differences –
| Companies | Q2 Actual Revenue | Q2 Actual Net Profit | Q2 Estimates Revenue | Q2 Estimates Net Profit |
|---|---|---|---|---|
| NTPC | 44,696 | 2,654 | 47,007 | 5,035 |
| Coal India | 27,271 | 6,138 | 30,482 | 8,055 |
| Maruti Suzuki India | 35,589 | 3,069 | 37,229 | 3,710 |
| Ultratech Cement | 15,635 | 827 | 15,711 | 1,032 |
| Adani Enterprises | 22,608 | 1,897 | 26,345 | 2,099 |
| Bajaj Auto | 12,688 | 2,005 | 13,245 | 2,203 |
| Adani Ports & SEZ | 7,067 | 2,414 | 7,267 | 2,601 |
| Hindustan Unilever | 15,729 | 2,601 | 15,753 | 2,693 |
| JSW Steel | 39,104 | 466 | 42,560 | 485 |
It is not only the net profit or the revenue that has dropped below the expectations for these companies but they also missed out on the net sales, EBITDA, and other financial metrics.
The consumer companies showcased the lowest growth in their sales volumes. While IT firms were sluggish and there were no signs of recovery in their growth.
On the contrary, the banks performed well in the second quarter and there was credit growth though moderate on a YoY basis. Even the net interest margin was stable during the quarter and asset quality was stable too.
Factors Behind the Slowdown
The primary factors that played behind the sluggish earnings in the second quarter of FY25 include –
- Structural challenges in the corporate sector
- Geopolitical pressures took a toll on the profit margins
- Economic as well as industry-specific challenges were there
- Demand shifts, and operational pressures
The slowdown in the market is a mixture of all these factors and not just one.
What does it mean for the market?
Sluggish Nifty firms’ reported earnings mean investors lose out on profit sharing, interim dividends, and surges in stock prices and growth. The Nifty and sensex have been down for a long time, while there are other reasons lower earnings have been one of the crucial reasons behind the slowing down of market activities as well. Investors need to gauge the prospects of the companies and future earning potential before putting in any money as the market is volatile and challenging at present.
It is not only the net profit or the revenue that has dropped below the expectations for these companies but they also missed out on the net sales, EBITDA, and other financial metrics.
The consumer companies showcased the lowest growth in their sales volumes. While IT firms were sluggish and there were no signs of recovery in their growth.
On the contrary, the banks performed well in the second quarter and there was credit growth though moderate on a YoY basis. Even the net interest margin was stable during the quarter and asset quality was stable too.
Factors Behind the Slowdown
The primary factors that played behind the sluggish earnings in the second quarter of FY25 include –
- Structural challenges in the corporate sector
- Geopolitical pressures took a toll on the profit margins
- Economic as well as industry-specific challenges were there
- Demand shifts, and operational pressures
The slowdown in the market is a mixture of all these factors and not just one.
What does it mean for the market?
Sluggish Nifty firms’ reported earnings mean investors lose out on profit sharing, interim dividends, and surges in stock prices and growth. The Nifty and Sensex have been down for a long time, while there are other reasons lower earnings have been one of the crucial reasons behind the slowing down of market activities as well. Investors need to gauge the prospects of the companies and future earning potential before putting in any money as the market is volatile and challenging at present.
Source: Moneycontrol
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