Daily Voice: These 4 sectors likely to post healthy double-digit growth in Q4FY25, says Baroda BNP Paribas MF's Shiv Chanani

Shiv Chanani is the Senior Fund Manager – Equity at Baroda BNP Paribas Mutual Fund

According to Shiv Chanani, the Senior Fund Manager – Equity at Baroda BNP Paribas Mutual Fund, overall aggregate profit growth for Nifty 50 companies is likely to be in low single digit in Q4FY25.

Sectors like telecom, metals, consumer discretionary and healthcare are likely to post healthy double-digit growth, while oil & gas and cement sectors likely to post decline in earnings on YoY basis, he said.

He is fairly constructive on FMCG sector. "The outlook for the sector is positive as urban demand is likely to revive on the back of benefits from tax exemption benefits," said Shiv Chanani with 24 years of experience in equity research, and asset management.

As we look forward to FY26, there are two contrasting factors at play. On one hand, there is uncertainty in external environment on account of tariff announcements and the lack of clarity on how exactly it is going to play out. On the other hand, domestic economy seems to be on improving trajectory driven by expected improvement in discretionary consumption following the implementation of tax cuts.

Also, we should remember that first half of last year had lower activity levels due to elections and hence we have a favourable base. On an overall basis, broader market expectation for FY26 earnings growth is close to 10 percent - which is in line with the overall nominal GDP growth. Consequently, we believe that the risk of earnings downgrade on aggregate basis seems low provided we do not see a significant slowdown in global growth.

Overall aggregate profit growth for Nifty 50 companies is likely to be in low single digit. However, one always needs to look into details as aggregate numbers may not convey the whole picture. So when we look at the details, we find that the operational income or EBITDA for the universe ex of financials and oil & gas sector is still likely to grow in early double-digit in Q4 for Nifty 50 companies. Similarly, aggregate net income growth ex of financials and oil & gas is likely to be high single digit.

Sectors like Telecom, Metals, consumer discretionary and healthcare are likely to post healthy double-digit growth, while Oil & Gas and Cement sectors likely to post decline in earnings on YoY basis.

However, one must realise that quarterly earnings for oil & gas sector tend to be volatile on quarterly basis. Also, although cement is likely to report a decline in profit on YoY basis, it is likely to show a significant improvement in profitability on sequential basis.

There are two factors playing out for IT sector. While there is a near term uncertainty related to tariff announcements and whether it leads to slowdown in the US economy. At the same time, there is an increasing need for the US companies to spend on new technologies like AI to remain competitive. Consequently, we believe that a bottom up approach in IT sector is more suited as some of the companies in the right space will do well, while some of them may face macro headwind driven demand pressure.

FMCG sector has been facing headwinds on account of slowdown in urban demand as well price increase in select input commodities. Consequently, while the FMCG companies are likely to deliver low single-digit volume growth, margins are likely to be under pressure. The good news is that, the outlook for the sector is positive as urban demand is likely to revive on the back of benefits from tax exemption benefits. Overall, we are fairly constructive on the sector.

RBI in its April-2025 monetary policy meeting decided to reduce repo rate by 25bps and changed the stance to ‘accommodative’ from ‘neutral’. The tone of the policy signaled more rate cuts given the change in stance. This will imply change in expectations of cumulative rate cuts in FY26 on the higher side.