These factors are set to have an impact on the earnings growth of India Inc in FY24, said experts.
A majority of analysts believe that domestic-oriented sectors will do well in the coming fiscal, when compared to the export-oriented sectors.
Banks and financial services have the maximum weightage on Nifty50, and this sector is expected to report strong earnings growth.
“BFSI looks to be in its best shape for almost a decade. We like financials from a structural long-term perspective, given the strong credit growth, vastly improved asset quality and attractive valuations after the recent correction,” said Rahul Bhuskute, chief investment officer at Bharti AXA Life Insurance.
Not just banks, Bhuskute believes even NBFCs, and life insurance companies have decent growth runways and are available at reasonable valuations.
The second big sector on Nifty 50 is IT, and the macroeconomic slowdown and financial instability in the US and Europe has turned the overall outlook for the sector murky for FY24. The US and Europe are the two biggest markets for the software industry, and banking and financial services is the biggest vertical for the top IT companies in India.
“We remain cautious on the India IT services sector, overall. We believe there will be a significant divergence in the operating performance in FY24 in the companies,” Nomura financial analysts Abhishek Bhandari and Krish Beriwal said in their recent report.
While the overall outlook for the sector remains bleak, experts recommend shifting bets to largecap names as they are in a better position than the midcap companies to withstand the risks.
On the domestic front, besides banks, analysts are bullish on automobiles, capital goods, industrial, and manufacturing companies and expect strong earnings growth.
Sectors that glue into the Indian consumption and manufacturing trend are likely to do well. Midcap manufacturing companies that cater to Indian businesses will see a good run as the Indian economy grows,” said Ram Kalyan Medury, founder and CEO of Jama Wealth.
Research head at TejiMandi, Anmol Das, is also bullish on the domestic-oriented companies and believes that many of them make for a case to invest for long-term prospects.
“Chemicals, IT, cement and auto ancillary sectors look to be trading at enough discounted valuations for the long term. Apart from these, recent corrections in the defence sector
can also act as a good entry point,” Das said.
For Rohan Mehta of Turtle Wealth Management, PSU, automobiles, metals and infrastructure are the top picks.
“PSU looks extremely a value buy. There isn’t much to lose into it, ironically all the other sectors we are bearish or neutral on,” he said.
Some analysts see challenges to earnings growth for the consumer-oriented sectors given that inflation risks persist.
“Based on how inflation moves, the risk of downgrades are there for the consumption sector which can see margin pressure along with growth impact in the discretionary segment,” Neha Khanna, Director, ValPro said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)