Jefferies India office has cut FY25 earnings estimates for 63 per cent of the 121 companies under coverage which have reported the second quarter earnings results so far, the highest downgrade ratio since early 2020.

“This seems to reflect the impact of a cyclical slowdown which has been signalled of late by Jefferies’ India office high frequency data. The Jefferies Economic Indicator (JEI), an Indian economy tracker based on 35 indicators’ monthly data, rose by 4.3 per cent year-on-year in September, up 1.7 ppts from a 3-year low of 2.6 per cent y-o-y in August but remained 0.6 ppt below the calendar year-to-date levels,” Jefferies’ analyst Christopher Wood’s latest Greed & Fear note highlighted.

Nifty 50 earnings

Jefferies now projects that Nifty 50 companies’ earnings will grow by only 10 per cent in FY25, indicating cautious sentiment about the near-term economic trajectory.

 Jefferies also noted a spike in equity supply in the market which has surged to around $7 billion per month, totalling about $60 billion year-to-date. This increased supply is now meeting robust domestic demand, signalling a more balanced market environment.

Banking on these levers, Wood retained his long-term bullish stance on Indian equities, albeit with some caution. He views the recent market correction as healthy, most particularly as it has impacted the most expensive part of the market.

“GREED & fear views the above correction as healthy, most particularly as it has impacted the most expensive part of the market, while the relatively inexpensive private sector banks have started to outperform of late amidst expectations of a potential cut in the cash reserve ratio (CRR) by the Reserve Bank of India in coming months,” the note said.

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