Tata Steel, JSW Steel, Bharti Airtel, Eicher Motors lead Nifty downgrades in Q3; Tata Motors sees highest upgrade

A total of four Nifty companies saw upgrades of over 5 per cent in FY24 earnings estimates post December quarter results, led by Tata Motors and ONGC. At least nine index constituents, however, saw more than 5 per cent drop in earnings estimates. They included Divi's Labs, Tata Steel, JSW Steel, Bharti Airtel and Eicher Motors, among others.

Following the quarterly earnings, Motilal Oswal said it has cut its FY23 Nifty EPS estimate by 0.9 per cent to Rs 812 from Rs 820. It is now expecting the Nifty EPS to grow 11.6 per cent in FY23 led by automobile and BFSI companies. Motilal Oswal expects the two sectors to constitute 112 per cent of the incremental earnings growth in FY23 while it sees metals and oil & gas sectors to drag earnings. On the other hand, it has raised FY24 EPS estimate by 20 basis points and FY25 by 0.80 per cent.

Among Q3 downgrades, Divi’s Labs led the Nifty downgrades, with 23.90 per cent drop in FY24 EPS estimates. It was followed by Bharti Airtel (down 25.4 per cent), SBI Life Insurance (down 14 per cent) and Eicher Motors (down 11.1 per cent). JSW Steel (down 7.7 per cent), HDFC Life (7.5 per cent), Tata Steel (5.8 per cent), Cipla (5.1 per cent) are some other Nifty companies that saw over 5 per cent cuts in FY24 estimates, Motilal Oswal suggested.

On the flip side, Tata Motors saw a solid 19.3 per cent jump in FY24 EPS estimate. It was followed by ONCG (10.7 per cent), Bajaj Auto (5.9 per cent) and Dr Reddy's Labs (5.3 per cent) and Coal India (4.2 per cent). SBI also saw FY24 earnings upgrade to the tune of 4 per cent. Below is the complete table reflecting changes in FY23 and FY24 EPS estimates for Nifty constituents:

Overall, profit for Nifty rose 11 per cent for the quarter against Motilal Osw3al's estimate of 14 per cent YoY). Excluding BFSI, profit remained flat against Motilal's estimate of 6 per cent growth). Heavyweights, such as Reliance Industries, SBI, ITC, Tata Motors, Kotak Mahindra Bank, Hindustan Unilever, Maruti Suzuki, M&M, Bajaj Auto, Dr Reddy’s Lab and Britannia recorded a stronger-than-expected performance, the brokerage said.

"Corporate earnings for 3QFY23 were below our expectations led by weak demand environment and macro headwinds, with financials and autos holding the fort once again. Slowdown in Consumption is a material concern if trends don’t reverse immediately. Markets are trading flat YTD and valuations are in the fair value zone with Nifty trading at  nearly 18 times FY24E EPS and, thus, offering room for modest upside if corporate earnings do not see material downgrades ahead

The brokerage prefers BFSI, IT, industrials, auto and cement while it remains underweight on energy in its model portfolio.

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