Nifty FY21 EPS up 14.2%, highest since FY11 despite downgrades

Nifty EPS grew 14.2% year-on-year in FY21 to ₹539, the highest since FY11. (Photo: Reuters)

MUMBAI: Notwithstanding the hit to businesses following the pandemic-induced disruptions in the first half of financial year 2021, earnings per share (EPS) of Nifty improved in the year, mostly led by metal sector. According to Motilal Oswal Financial Services, Nifty EPS grew 14.2% year-on-year in FY21 to ₹539, the highest since FY11.

“The upgrades are entirely led by metal companies. Excluding Metals, Nifty net profit for FY22 and FY23 would have seen cuts of 2.2% and 0.4% respectively," said Gautam Duggad, head of research-institutional equities, Motilal Oswal Financial Services Ltd said.

The brokerage firm has revised its FY22 and FY23 Nifty EPS estimate upward by 2.6% and 1.4% to ₹746 and ₹872 respectively.

Corporate earnings in the last quarter of FY21 continued the momentum of the preceding two quarters and ended the year on a good note, aided by the deflated base in March quarter of FY20 and healthy demand recovery for a large part of last quarter of FY21.

Motilal Oswal Financial Services Ltd said trend of earnings revision has changed in favour of downgrades again in Q4FY21 after two consecutive quarters of upgrades. The downgrade-to-upgrade ratio stood at 1.6:1.

“With the pace of vaccinations picking up and states unlocking again, confidence is gradually returning in corporate commentaries as we exit Q1FY22", Duggad said.

Autos, cement, consumer durables, oil & gas, and utilities reported a beat on Q4FY21 estimates, while consumer, private banks, healthcare, metals and IT were in line.

Corporate earnings in Q4FY21 were led by cyclicals and a combination of low base and strong demand revival as economic activity improved. India Inc. displayed tremendous resilience in FY21, with the Nifty ending the year with a healthy 14% earnings growth, which was unthinkable a year back, Duggad said.

The second covid wave in April-May soured sentiments and hit economic activity.

“Since the restrictions this time was localised and less stringent versus the lockdown in 2020, we expect the impact in Q1FY22 to be contained. We expect earnings momentum to accelerate in FY22 as the pace of vaccinations picks up and the economy opens up further BFSI and commodities are expected to drive FY22 earnings. The market has been strong and largely looked through the second covid wave on the back of strong liquidity and robust participation from non-institutional investors," Duggad added.