Market Set For Near-Term Bottom On Better Q2 Performance By Broader Stocks: Morgan Stanley

The market looks good for a near-term bottom as the second quarter remained better for the broad market, even though the earnings growth and breadth declined sequentially, according to Morgan Stanley.

The second quarter earnings growth beat low analyst expectations, the brokerage said in a note. "We think the sell side is set to be surprised to the upside in second quarter, following major reductions in earnings estimate in recent weeks."

The earnings remained better for the broad market than the narrow indices, it said. Morgan Stanley is overweight on six companies after the second quarter earnings: Godrej Properties Ltd., ICICI Bank Ltd., Infosys Ltd., InterGlobe Aviation Ltd., PNB Housing Ltd., and Ultratech Cement Ltd.

The brokerage is underweight on Hero MotoCorp Ltd., L&T Finance Ltd., RBL Bank Ltd., Shree Cement Ltd., and Wipro Ltd.

The Maharashtra election results on Nov. 23 and US policy transition in 2025 could influence the market trend, which "looks good for a near-term bottom."

Sensex and Nifty revenue growth were 286 bps and 186 bps higher relative to Morgan Stanley analysts' estimates. "Net profit growth for Sensex and Nifty were each 400 bps higher than our analysts' expectations."

The profit growth of India Inc. continued to remain muted with overall 'misses', rising slightly even as 'beats' rose compared to the year ago period.

Citi Research said that at aggregate levels, the reported numbers were below expectations, as certain segments of the markets have pulled down overall earnings.

Consumption and asset quality remain the top queries for investors after the second quarter reports, Surendra Goyal, head of India research, Citi, told NDTV Profit.

We should see "some pickup" albeit not a large one in the December quarter, Goyal said. "Even while entering the year, our numbers were below consensus and through the last 7-8 months we have been 2-3% below consensus."

It doesn't look like a big recovery when seen at all drivers from an earnings perspective, Goyal said. "From the Nifty level, the earnings growth for this year is more mid-to-high single digits."

While rural consumption is gradually improving, surprise was on the urban side, he said. "Discretionary spending has been weak for a while, not seeing a change in trend."