The latest earnings season (2QFY23) ended, leaving the markets with “glass half full or glass empty” feelings. The aggregate results were mostly in line with the already moderated expectations; though granular details indicate a wide divergence within sectors. Overall, the management commentary sounded optimistic about easing raw material, logistic and wage cost pressures; though the companies did not sound particularly sanguine about the demand environment, especially the rural demand and export demand.
The earnings for 2QFY23 were also mostly driven by financials;
while IT, FMCG and Pharma also put up a good show. Oil & Gas, capital goods,
consumer durables, telecom, automobiles and cement were notable underperformers.
Post the results, FY23 Nifty EPS estimates have seen marginal changes, while
FY24e earnings estimates have been moderated further. The long term (5yr CAGR) earnings
trajectory is now flattening after a sharp growth witnessed during FY19-FY22.
This flattening of long term earnings trajectory may jeopardize any chance of a
PE re-rating of Indian markets, in my view.
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