Equity Monthly View for April 2025

April 2025 witnessed a reversal in FPI flows and an ease of global tariff related uncertainties, leading to a rise in broader indices.  While the earnings season was muted across many sectors, benign inflation, soft crude prices and signs of a reversal in FPI (Foreign Portfolio Investors) flows (Refer Table1) led to BSE 500 recording a rise of 3.2% during the month. Global markets were flattish during the month, indicative of an ease in global tensions. Trump’s 90-day pause on recently announced high rate of tariffs and willingness to advance bilateral trade deals indicates a potential softening of tariffs over the medium term.

Table 1: Institutional Flows:

Source: NSDL, SEBI, Data as on April 30, 2025

As shown in the table below (Refer Table 2), domestically focused sectors outperformed the broader markets. Though earnings remain muted across most sectors, benign inflation and income tax cuts announced in the recent budget could support consumption in the medium term.

Table 2: Performance of Major Indices during the Month

Source: Bloomberg, Data as on April 30, 2025

The muted growth trend in revenue and profits is continuing in the ongoing result season. Aggregate revenue and earnings growth for companies which have disclosed their March- 2025 quarter results that are part of the BSE 500 Index for the March-2025 quarter are indicated in the below graph (Refer Graph 1 and 2). Though the recent softening in input prices has helped in a marginal improvement of profitability, volume growth remains tepid across most sectors.

Graph 1: Aggregate Revenue and Profit Growth in March-2025 Quarter for BSE 500 companies:

Source: Ace Equity; Data as on May 05, 2025

Graph 2: Trend of Corporate Profitability for Listed Universe (% YOY) :

Source: CMIE; Data as of Dec-2024 Quarter; Net Sales and PBIDT (Profit Before Interest, Depreciation and Taxes) growth is considered.

While we remain focused on long-term trends, it is important to note the recent trends. Key Sectoral highlights from the recent quarterly results are:

• Cement companies are witnessing an improvement in profitability aided by a softening of fuel prices. Volumes have picked up supported by an improvement in government spending.

• Consumer staples continues to report muted volumes amid an ongoing urban slowdown.

• IT companies have guided for muted growth amid a deferment in discretionary spends arising from uncertainty around the U.S. government policies.

• Banks continue to report benign asset quality. Few front-line Banks reported a moderation in credit growth, reflective of the general economic slowdown.

• Real Estate companies have reported moderate growth in pre-sales and collections on a high base.

Barring cement volumes, two-wheeler sales and GST collection, majority of broad macro indicators doesn’t indicate a meaningful improvement trajectory. Cement volumes were supported by an improvement in government capex. The following tables (Tables 3 to 5) show the growth indicators of key frontline sectors.

Table 3: Growth in Eight Core Industries

Source: Office of Economic Advisor, Data as on March 2025

Table 4: Residential Real Estate Sales

Source: Anarock; Data as of March 2025.

Table 5: Domestic Auto Sales (% YOY)

Source: Society of Indian Automobile Manufacturers, Tractor and Mechanization Association; Data as of March -2025

While the near-term economic trend looks soft across many sectors, valuations appear reasonable across many sectors in the large cap space (Refer Tabe 6 and Graph 3). Benign inflation across food and fuel segments could keep inflation contained in the medium term. The ongoing interest rate cuts and potential consumption boost from recent income tax cuts augurs well for the economy over the medium term. While current valuation levels may not offer potential for super normal returns, risk reward appears reasonable in the large cap space. Investors may consider fortifying their large cap allocations to equity in a staggered manner.

Table 6: Current Valuation Vs Historic Median of major indices

Source: Bloomberg; P/E: Price to Earnings; P/B: Price to Book; Data as of April 30, 2025

Graph 3: Long Term Valuation Chart of BSE Sensex Around Historic Average:

Source: Bloomberg; Data as of April 30, 2025

Above article is authored by Quantum.

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