Nifty 50 Companies To See Muted Earnings Growth In Q3: Citi

The third quarter of fiscal 2023 is expected to be "relatively muted" for Nifty 50 companies with around 6% earnings growth, according to analysts at Citi.

"The earnings expectations of companies besides Nifty 50, are essentially flattish year-over-year, which is slightly below the 6% for Nifty," Surendra Goyal, head of India research at Citi told BQ Prime's Niraj Shah.

The domestic steel sector is expected to witness a "correction" in prices which will be offset by coking coal cost.

"The wild card for us this year is Tata Steel Europe. We are anticipating an EBITDA loss of nearly $90/ton," Rashi Chopra, metals and cement analyst at Citi said.

Meanwhile, the auto sector is likely to witness a gross margin expansion, according to Arvind Sharma, autos and aviation analyst at Citi. "We are seeing a bit of premiumisation in some segments as well. Notably, higher end SUVs and bikes," he said.

However, demand may remain volatile for export-oriented auto part makers and original equipment manufacturers in the two-wheeler space in India.

"A fallout of slightly weaker exports is that there is more focus on domestic markets and therefore the competitive intensity tends to escalate, which could result in a bit of a pricing pressure across industry across players," he added.

Citi underscored the need to hike prices by two wheeler companies and said that is will watch out for rural demand in the sector.

The oil marketing companies, on the other hand, may see an improvement in the third quarter, according to Saurabh Handa, oil, gas and telecom analyst at Citi.

One important event to watch out for will be the budget, if there is anything positive in terms of subsidy compensation for them, he said.

With trough valuations of oil marketing company stocks, Citi believes the risk-reward ratio is "attractive on selective basis."

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