A Close Look at the Q3 FY25 Results of Indian Equities

In Q3 FY25, an examination of all the listed companies by market capitalization reveals several key trends. The market as a whole recorded an earnings increase of 3.68% quarter-on-quarter (QoQ) and 11.34% year-on-year (YoY) on a trailing twelve-month (TTM) basis.

Total revenue on a TTM basis reached approximately Rs. 175 trillion ($2,015 billion), which represents 58% of India’s GDP. In addition, cumulative profits for the period totaled Rs. 16 trillion ($187 billion), outlining the overall profit pool among the leading companies.

Key Market Observations

• Deceleration in Revenue Growth: Following a period of rapid expansion in 2021, 2022, and early 2023, QoQ TTM revenue growth has noticeably decelerated across large, mid, and small-cap segments
• Midcap Companies Lead: Midcap companies delivered robust earnings growth in Q3 FY25, outperforming both large and small caps and even surpassing their historical performance averages
• Challenges for Small Caps: Revenue for small-cap companies declined this quarter, reflecting signs of stress. With these companies trading at high P/E multiples without corresponding earnings growth, a 25% correction was unavoidable
• Earnings as the Market Driver: When growth stagnates, lofty valuations tend to falter. This slowdown in earnings growth explains the marked downturn in the small-cap segment

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Sector-Wise Performance Analysis

Using NSE’s 12-sector classification, Q3 FY25 revenue and PAT growth were evaluated against each sector’s historical performance, leading to several insights:

• Lagging Revenue Growth: Only 2 out of 12 sectors — diversified and telecommunication — managed to grow their revenues, while the latter lagged behind their historical averages
• Mixed Profit Outcomes: PAT growth presented a mixed picture, with 6 out of 12 sectors registering gains, whereas 7 sectors fell short relative to their historical trends on a TTM QoQ basis
• Telecommunication Sector’s Revival: For the first time, the telecommunication sector turned profitable, generating over ₹11,000 crore in aggregate profits in Q3 FY25 after several years of losses

Dissecting the Profit Landscape

A detailed look at the sector-wise composition of the profit pool reveals several critical drivers:

• Financial Services’ Pivotal Role: In the large-cap segment, financial services account for 40% of total profits, generating over ₹4,40,000 crore annually. This sector is a major contributor across various market segments, at times supplying more than 30% and even exceeding 50% of overall profits
• Other Key Contributors: Energy, commodities, IT, and consumer discretionary sectors continue to play significant roles in overall earnings
  • Healthcare plays a modest role, contributing just 3% of total large-cap profits
  • Large caps exhibit consistent profit growth, aggregating ₹11 lakh crore
  • Industrials make a greater impact in mid and small caps, contributing 10% of PAT in midcaps and 17% in small caps, compared to only 3% in large caps
  • IT remains primarily a large-cap domain, with its share in mid and small caps below 5%
  • Consumer Discretionary remains a steadfast performer across all market segments, with aggregate earnings of ₹1,44,000 crore

Conclusion

The Q3 FY25 review of all listed companies in India presents a nuanced picture. While overall earnings are on the rise and sectors like midcaps and telecommunication are showing resilience, the slowdown in revenue growth and challenges faced by small caps remain concerning. The detailed sector-wise analysis highlights the crucial role of financial services in driving profits, along with significant contributions from energy, commodities, IT, and consumer discretionary sectors. As market conditions continue to shift, a deep understanding of these trends is vital for investors and analysts alike.