Analysts’ Take On India Inc.’s Q3 Results And Market Outlook
An employee wearing a protective face mask looks at company trading price movements on a digital screen inside the Euronext NV Paris stock exchange in the La Defense business district of Paris, France. (Photographer: Cyril Marcilhacy/Bloomberg)

Analysts’ Take On India Inc.’s Q3 Results And Market Outlook

Analysts from BofA Securities and Nomura see near-term risks for Indian equities that may lead to a consolidation in the market.

Rising commodity prices, bond yields and a surge in Covid-19 cases in some parts of the country are some of the key risks highlighted by the research firms in their notes. “With the Nifty already at our year-end target of 15,000, continuation of a broad-based market rally appears unlikely,” BofA Securities said.

According to Nomura, a rise in trade and current account deficit, too, is a cause of concern.

Indian equities have rebounded nearly twofold from their March-low triggered by the pandemic as the lockdown curbs were lifted, foreign investors pumped money, hopes of a Covid-19 vaccine and improving corporate earnings.

Most Nifty 50 companies either met or beat estimates in the quarter ended December. The average Ebitda margin of 39 of the 50 constituents in the Nifty—excluding banking, financial and insurance companies—expanded to 25.02% in the October-December period from 21.94% a year ago. That, according to a Yes Securities report, is due to higher realisation on sales, effective cost management, and improving economies of scale supporting Ebitda growth.

Here’s what analysts have to say...


  • Nifty 50 stocks recorded cumulative earnings growth of 13.4% year-on-year, beating street estimates by 5.7%.
  • Despite positive medium-term outlook, sees some near-term risks to equities after the strong rally.
  • Key risks: increasing Covid-19 cases can stall the current recovery, higher commodity prices may adversely impact near-term margins, rise of trade and current account deficit and rising bond yields.
  • India’s macros are relatively better compared to the taper tantrum period as there is stronger policy support for growth and strong foreign flows.
  • Most overweight on financials and infra/construction. Expects strong earnings growth in these sectors over the medium term. Also overweight on IT services.
  • Underweight on consumption and oil & gas.

BofA Securities

  • 31 companies, comprising 46% of free-float weighted market cap within the Nifty 50 are exposed to commodity risks.
  • Discretionary, materials, staples, energy and industrials are most at risk.
  • Healthcare and utilities should be able to pass on commodity cost pressures.
  • Q3 FY21 gross margins expanded despite the rise in commodity prices.
  • Consumer durables and auto firms announced price hikes in January and suggested potential for further hikes, which may impact volume growth.
  • Sees rising bond yields and potential localised lockdowns as risks for the markets ahead.
  • Prefers industrials / materials and financials as overweights.
  • Shifts marginal overweight stance on telecom and staples to neutral weight.
  • Remains underweight on consumer discretionary / autos, IT and energy sectors.
  • Top picks: L&T, Adani Ports, Cummins India, Siemens, UltraTech, Ambuja.
  • Top financial picks: HDFC, HDFC Bank, HDFC Life, ICICI Bank, Axis Bank, IndusInd Bank.
  • Cautious on: Tata Motors, Maruti Suzuki, Asian Paints.


  • Strong quarter drives earnings growth.
  • Recommendation downgrades by CLSA analysts were nearly 3x of the upgrades, possibly due to valuation concerns.
  • Second consecutive reporting season in which consensus lifted Nifty EPS after 23 quarters of downgrades.
  • Raises earnings estimates for nearly two-thirds of covered stocks, while one-fourth saw earnings estimate cuts.
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