Thu Sep 26 13:17:22 UTC 2024: ## Nifty Earnings Growth Expected to Slow Down in FY25: BofA

**Mumbai, India -** Analysts at Bank of America (BofA) have forecast a significant slowdown in Nifty earnings growth, projecting a decline to 10% in Fiscal Year 2025 (FY25) from 18% in FY24. This anticipated decrease is attributed to a confluence of factors impacting the Indian equity market.

The primary driver of this slowdown is expected to be the moderation of topline growth, which contributed significantly to FY24’s earnings increase. Additionally, margin gains, which previously bolstered earnings growth, are likely to fade as the effects of softer commodity prices become more pronounced.

BofA also highlights potential risks associated with other income streams, citing the prevailing high-interest rate environment and robust equity market performance in FY24 as potential challenges for companies within the Nifty index.

The analysts project that 73% of Nifty’s market capitalization could experience single-digit earnings growth, while 68% may see a deceleration in earnings growth. This trend extends beyond the Nifty, with 52% of NSE200 sectors expected to exhibit weaker growth and 78% likely to face earnings deceleration.

While softening commodity prices may benefit sectors like industrials, autos, and downstream energy, constituting 15% of Nifty’s market cap, it could negatively impact upstream energy and materials, which make up 16% of the index. BofA suggests a 10% drop in commodity prices could lead to a 60 basis points reduction in Nifty earnings.

Considering major sectors, financials and energy, representing 45% of the Nifty, are likely to exert significant downward pressure on overall earnings. Meanwhile, the IT and consumer staples sectors, accounting for 23% of the index, may experience some revival but are still expected to achieve only single-digit growth at best.

BofA analysts advocate for a prudent investment strategy emphasizing sector rotation. They recommend focusing on sectors with high earnings visibility and favorable valuations, such as NBFCs, healthcare, staples, telecommunications, two-wheelers, and industrials. Conversely, they advise caution regarding sectors with potential for earnings downgrades, including IT, metals, utilities, energy, and cement.

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