India's micro outlook is limited, says Kotak

Over FY2024-25, Kotak predicts moderate earnings growth with limited earnings upgrades across sectors, warning that earnings downgrades in consumer discretionary cannot be completely ruled out.

In its latest report, brokerage firm Kotak Institutional Equities said while the macroeconomic outlook has improved, the micro outlook remains muted.

The report predicts moderate earnings growth over FY2024-25, with limited opportunities for earnings upgrades across sectors, warning that downgrades in consumer discretionary cannot be ruled out. Several factors are contributing to the current period of weak demand, the report says.

Due to a lower-than-expected tax rate for RIL, Kotak's fourth quarter fiscal year 2023 earnings exceeded its muted expectations. Both consumer and IT companies reported weak results, with weakness across most consumption categories. Despite the challenging environment, lending continued to be robust. Weak global demand impacted outsourcing companies, the brokerage said.

Markets have well received recent macroeconomic improvements, including peaking interest rates and improved balance of payments. In the country, interest rates may have peaked, easing concerns about the negative impact of higher interest rates on housing.