Q4 earnings: Positive surprises from Nifty 50 banking majors fire up indices

The banking pack has been the major drivers in the Nifty 50's journey to record highs.

The Q4 earnings season so far has been a mixed bag of sorts, but there's one sector that has delivered a beat on expectations, thus firing up the benchmark Nifty 50 to a new peak. The private banking pack, which also happens to hold the maximum weightage, has mostly delivered better-than-expected results for the January-March period with lenders like ICICI ank and Axis Bank, leading from the front.

Be it Axis Bank's return to profit or strong deposit growth delivered by the likes of ICICI Bank, IndusInd Bank, and HDFC Bank, investors seem to be turning more bullish on private lenders. Another factor steering optimism for the sector has been its attractive valuations, especially at a time when the record rally has swelled prices beyond fundamentals across most pockets of the market.

All of the four Nifty 50 banks that have released their quarterly numbers so far have either topped market expectations or delivered in-line results. These banking stocks have a combined weightage of over 22 percent in the Nifty 50, which is why they emerged as the biggest drivers in Nifty 50's journey towards its new peak near 22,800.

The strong earnings performance of the private banking pack has also lifted the Nifty Bank index to a record high of 49,974.75 points.  Most public sector banks are yet to release their Q4 earnings and analysts expect them to deliver even better results than their private sector peers.

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Aside from banks, much of the Nifty 50 earnings have been lacklustre so far, with a few big surprises here and there. Bajaj Auto was a major star performer as it posted better-than-expected Q4 numbers, aided by strong domestic performance. However, the stock’s expensive valuations took the sheen off its stellar earnings show.

Private life insurers HDFC Life and SBI Life were among others that beat the Street’s earnings expectations. While SBI Life’s strong Q4 earnings ushered positivity among investors, HDFC Life’s miss on its VNB guidance soured sentiment.

On the other hand, non-bank lender Bajaj Finance struggled with concerns over margin pressures which weighed heavily on the stock.

Coming to FMCG majors, Hindustan Unilever and Tata Consumer reported a fall in earnings amid sluggish rural consumption and inflationary pressures. Analysts also feared persisting margin pressure for the sector, which resulted in their subdued stock performance post the Q4 results.

A similar story panned out for information technology majors as all of them, with the exception of Wipro, posted lower-than-expected earnings. In Wipro’s case as well, the earnings beat was only marginal. Persisting macroeconomic headwinds, weakness in discretionary spending and declining headcounts have kept the Street on a caution towards the sector.

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