3QFY25 earnings season was disappointing, with single-digit PAT growth for the Nifty and BSE500. This triggered another round of downgrades, though less severe than in Oct-24. The markets remain volatile, with SMIDs selling off 15.6% since 1-Jan. We expect the market to stay under pressure through this quarter, but to recover from 1QFY26 as earnings stabilize and global stresses ease. We see the Nifty in a buy zone at ~22.5k, with Discretionary, Healthcare, and Telecom our key OW sectors.
Q3FY25 results – Muted, but sequential improvement
Q3FY25 results for BSE500 and Nifty companies were muted, though with some sequential improvement. PATg was 7.1%/5% YoY for BSE500/Nifty, driven by stable sales growth and a modest EBITDA margin expansion of 18bps. This indicates earnings may be bottoming out and showing early signs of recovery. The weak single-digit growth is an improvement over the contraction in Q2FY25. Discretionary, Energy, Materials, Telecom, and Real Estate outperformed while Industrials, Staples, and Financials were weak. The share of negative surprises also improved sequentially in 3QFY25.