By laksh5382 
After a challenging first half of fiscal year (FY) 2025, the corporate earnings outlook is likely to improve in the second half as government spending remains strong. kharif crop And rural demand is set to resume recovery, Motilal Oswal Said in a report. “After a flat 1HFY25, as government spending revives in 2HFY25, this should bode well for corporate earnings along with a good kharif crop and improvement in rural demand,” the report said.
Corporate earnings in the second quarter saw a subdued picture, notably a decline from objects Area.
However, except for this segment, earnings were broadly in line with expectations. The consumption sector witnessed challenge and emerged as a major weak point. The second quarter saw asset-quality stress in the BFSI (banking, financial services and insurance) sector.
-
Also read: Commerce department plans to meet with heads of missions in major countries to promote exports
The report suggests that the level of government spending has been a significant factor that has impacted the corporate earnings of companies.
Flat spending in 1HFY25, as well as demand disruption in rural and semi-urban markets due to excess rainfall, led to the earnings decline.
However, a reversal of these trends in the latter half of FY20 is expected to accelerate the recovery. Motilal Oswal has said this in his analysis niftyA further cut of 1 per cent was seen in FY25 EPS after a 4 per cent decline during the 2QFY25 earnings preview. Over the past six months, FY25 expected earnings growth has been revised down by about 7 per cent, bringing the projected growth rate down to a modest 5 per cent, the weakest since FY20.
It further said that despite a 10 per cent decline from recent market highs, valuations remain a matter of concern. Nifty currently trades at a 12-month forward price-to-earnings (P/E) ratio of 20 times, which is close to its long-term average (LPA) of 20.5 times. However, broader markets appear more extended NSE The Midcap 100 index is trading at a Forward P/E of around 29x.
In Q2FY25, performance of various sectors reflects a mixed bag. Weakness in the commodity sector played a significant role in the softening of overall earnings.
Consumer demand showed signs of fatigue, especially in discretionary spending categories. On the other hand, select segments of the BFSI sector are grappling with asset-quality challenges, indicating vulnerabilities despite broad sectoral resilience.