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Business Standard
13-06-2025
- Business
- Business Standard
Mutual fund cash exposure declines for the first time in six months
Equity mutual fund (MF) schemes reduced their cash holdings in May for the first time in six months, as geopolitical and trade tensions showed signs of easing. According to a Motilal Oswal Financial Services report, the top 20 fund houses held 6.8 per cent of their portfolios in cash as of May 31, down from a record high of 7.2 per cent in April 2025. Fund managers have been increasing cash levels since December 2024 amid a market correction and rising global uncertainties. May brought relief on multiple fronts. Fears of an India–Pakistan conflict subsided after a ceasefire, while progress on the India–UK trade deal and easing the US–China tensions improved the trade outlook. Additionally, sustained foreign portfolio investor (FPI) inflows buoyed domestic market sentiment. Benchmark indices extended their gains for the third straight month, with the Nifty and Sensex rising 1.9 per cent and 1.8 per cent, respectively. Broader markets outperformed, as the BSE 500 surged 3.5 per cent, marking an improvement in market breadth after months of weakness. However, domestic investor participation remained tepid. Equity MF inflows fell for the fifth consecutive month to ₹19,013 crore — the lowest in 13 months. Despite this, fund managers deployed cash aggressively, purchasing equities worth ₹49,000 crore in May, nearly triple April's buying. Most major fund houses reduced cash levels. SBI MF, the largest, cut its cash holding from 10 per cent to 8.6 per cent, while ICICI Prudential's declined from 8.2 per cent to 6.9 per cent. Cash levels are seen as an indication of the fund manager's view of the market. While MF executives maintain that their mandate is to remain fully invested, they strategically maintain some cash reserves during periods of market uncertainty. However, according to experts, changes in cash levels in equity schemes can also be transitory due to major changes in portfolio or sharp inflow or outflow at the end of the month. The change in value of equity holding due to market movement also impacts the cash holding on a percentage level. SBI MF maintained a 'neutral' stance on equities, citing balanced valuations, it said in a note. 'The sharp drop in 10-year bond yields over the past few months has meant that on our preferred gauge of equity valuations, which looks at equity yields as a relative spread to government bond yields, equity valuations stay near averages even with the uptick in equity markets over the past few weeks,' the report said. 'In addition, equity sentiment as measured by our proprietary framework stays in the neutral zone after the cool off from stretched readings of the past year through the correction,' it said. 'The recent drop in bond yields has kept equity valuations near historical averages, even after the market rally,' it added. The fund house added that its proprietary sentiment indicators remain neutral after cooling off from the previous year's elevated levels. In its latest outlook on the equity market, ICICI Prudential MF said that while the long-term structural story of India remains intact and there are tailwinds for economic growth to pick up, valuations remain an issue. "Recent RBI actions like liquidity injection; key policy rate cuts, high dividends to the government are positive for India's business cycle and in turn may result in India's growth and corporate earnings to pick up. investors with a long-term view can remain invested in equity markets. However, due to high valuations. the fresh investments should be done prudently," it added.
Mint
12-06-2025
- Business
- Mint
The IPO gamble: The odds seem stacked against investors
Of the 275 initial public offers (IPOs) in India since covid, 35% have delivered negative returns on their issue price. Compared to their listing price, which is the price at which shares start trading, almost half have delivered negative returns. Relative to the BSE 500 return too, half or more have underperformed. Overall, only 36% of IPOs over the past five years have been a worthwhile investment. Surprisingly, qualified institutional placements (QIPs) fared only marginally better. Of the 224 QIPs since the pandemic, only 99 have outperformed the BSE 500 index, giving these professional investors a success rate of 44%. Also Read: IPO slump: Stock market indices flashing red shouldn't stop public offers An analysis at this time is important as the IPO market is stirring again after a recent lull. Why the success rate of IPO investments is poor is not hard to figure. The transaction is lopsided; a deeply informed and highly motivated seller meets far less informed buyers. The seller is either the promoter of the company going public or an existing private equity investor who is privy to superior information about the company. The buyers, however, even if they are institutional investors, make their investment decisions on the basis of an hour-long presentation (or interaction) and a few ancillary checks with suppliers, customers or bankers at best. The situation becomes even more lopsided when an army of cheer-leading investment bankers go all out to create a glib slide deck and make the road-show management team cram in all the buzzwords that investors want to hear. Some investors get swayed by rare IPO success stories that begin with: 'Had you invested ₹10,000 in the Infosys IPO…," missing the fact that for every Infosys and Wipro IPO, carcasses of many others lie in their demat accounts. This also misses the fact that hardly any investor stays the course to reap the advertised fruits of capital growth. An additional dynamic in the recent IPO cycle has been that of private equity sellers. Earlier, new money raised was either invested in the company (in case of a primary issuance) or went to promoters selling some of their stake. Now, many IPOs involve a private equity firm making an exit. Of the 275 IPOs mentioned earlier, 101 had a private equity owner selling its stake (PE-IPOs). The success rate of these is worse, at 30%. Also Read: Vivek Kaul: IPOs aren't raising much capital for new ventures Apart from the fact that PE-IPOs seem to be finely priced, note that the money so raised is not invested in the company. In most cases, it is repatriated to the home country of the PE fund. This trend has been evident in India's foreign direct investment (FDI) data. In 2023-24, while gross FDI was $75 billion, net FDI was barely $10 billion. The gap was partly explained by the repatriation of almost $45 billion by foreign entities. The data for 2024-25 shows much weaker net FDI, with repatriation playing a major role. Numbers from a recent Bain & Company report suggest that in 2024, almost $20 billion was sent out by private equity firms that had cashed out in public markets. This does not include multinational firms like Hyundai listing their local units and sending back the share-sale proceeds. This trend of large repatriations has picked up in the last five years. It is likely to continue and even accelerate as PE players are under pressure to sell their investments. Those whose money is deployed seem to be displaying some impatience. A recent article in the Financial Times quoting a Bain & Company report stated that distributions as a proportion of net asset value for private equity had fallen from an average of 29% between 2014 and 2017 to just 11% last year. India is one of the few bright spots in an otherwise limp global IPO market. It is therefore not surprising that PEs want to tap our domestic liquidity to book profits. Also Read: The IPO frenzy isn't a sign of a robust stock market The value of unsold PE stakes in listed companies in India could broadly be in the range of $25-30 billion. The bigger source of equity supply for public markets would be in the form PE-owned unlisted firms that are looking to hit the IPO market. While it is hard to get an exact estimate, the apex body for private equity and alternate assets in India, IVCA, claims to represent $350 billion of assets under management in India. This would include investments in physical assets and credit, but it is fair to assume that a significant amount of it would be in the form of equity. This PE-led supply will likely keep a lid on market prices. There is no single all-encompassing answer to whether public markets should provide PE investments with an exit path. But when considering whether to apply for the next IPO, it would be worthwhile to remember the odds of success. These are the author's personal views. The author is the managing partner at Breakout Capital.
India Gazette
09-06-2025
- Business
- India Gazette
Indian companies profit growth slows in FY25, capex weakens amid soft demand: Nuvama
Mumbai (Maharashtra) [India], June 9 (ANI): The profit growth of Indian companies slowed down in the financial year 2024-25, as soft demand, weak top-line performance, and slowing capital expenditure weighed on overall corporate performance, says a report by Nuvama Research. According to the report, the aggregate profit after tax (PAT) for companies in the BSE500 index (excluding Oil Marketing Companies) grew just 10 per cent year-on-year in Q4FY25, and 9 per cent for the full FY25, down from a stronger 21 per cent growth recorded in FY24. The report said 'Q4FY25 PAT growth for BSE500 (ex-OMCs) rose to 10 per cent YoY (Q3FY25: 8 per cent), though top line stayed weak, due to cost rationalisation (wage bill growth just 5 per cent) and a low base'. In Q4FY25, profits grew 10 per cent from the same quarter last year, slightly better than the 8 per cent growth seen in Q3FY25. This was achieved mainly through cost-cutting measures, including a modest 5 per cent growth in wage bills, and the benefit of a low base. While sectors like metals, telecom, chemicals, and cement posted improved profits, segments such as public sector banks and industrials, which had led growth in FY24, saw a slowdown. The report also pointed out a significant drop in capital expenditure (capex) growth. Despite strong operating cash flows, India Inc's capex grew just 6 per cent in the second half of FY25, compared to 20 per cent growth seen in FY23 and FY24. While this cautious approach might be seen as positive from a governance and valuation standpoint, it also reflects weak demand conditions and may pose risks to future earnings. Mid- and small-cap (SMID) companies, which had underperformed large-cap companies for most of FY25, showed some profit recovery in Q4FY25, supported by cost control and a low base. However, for the full year, their performance aligned more closely with large caps, after outperforming them in FY24. The report described FY25 as a 'year of reconciliation' where several trends from FY24 moderated. Profits, revenues, and capex all grew by around 8-10 per cent, returning to pre-COVID trends. Looking ahead, the outlook for FY26 remains uncertain. The report noted that earnings estimates for FY26 have been downgraded by 2 per cent, and one-year forward earnings per share (EPS) projections have stagnated, similar to trends seen before the pandemic. Nuvama said the Street currently expects 15 per cent earnings CAGR for FY25-27, but flagged downside risks due to weak demand, slowing credit growth, corporate cost-cutting, and uncertain export conditions. In summary, FY25 marked a slowdown for India Inc, with all major financial indicators reconciling with a subdued top-line performance, and the outlook for FY26 remains cautious. (ANI)
Time of India
09-06-2025
- Business
- Time of India
Indian companies profit growth slows in FY25, capex weakens amid soft demand: Nuvama
The profit growth of Indian companies slowed down in the financial year 2024-25, as soft demand, weak top-line performance, and slowing capital expenditure weighed on overall corporate performance, says a report by Nuvama Research . According to the report, the aggregate profit after tax (PAT) for companies in the BSE500 index (excluding Oil Marketing Companies) grew just 10 per cent year-on-year in Q4FY25, and 9 per cent for the full FY25, down from a stronger 21 per cent growth recorded in FY24. The report said "Q4FY25 PAT growth for BSE500 (ex-OMCs) rose to 10 per cent YoY (Q3FY25: 8 per cent), though top line stayed weak, due to cost rationalisation (wage bill growth just 5 per cent) and a low base". Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Play War Thunder now for free War Thunder Play Now Undo In Q4FY25, profits grew 10 per cent from the same quarter last year, slightly better than the 8 per cent growth seen in Q3FY25. This was achieved mainly through cost-cutting measures, including a modest 5 per cent growth in wage bills, and the benefit of a low base. While sectors like metals, telecom, chemicals, and cement posted improved profits, segments such as public sector banks and industrials, which had led growth in FY24, saw a slowdown. Live Events The report also pointed out a significant drop in capital expenditure (capex) growth. Despite strong operating cash flows, India Inc's capex grew just 6 per cent in the second half of FY25, compared to 20 per cent growth seen in FY23 and FY24. While this cautious approach might be seen as positive from a governance and valuation standpoint, it also reflects weak demand conditions and may pose risks to future earnings. Mid- and small-cap (SMID) companies, which had underperformed large-cap companies for most of FY25, showed some profit recovery in Q4FY25, supported by cost control and a low base. However, for the full year, their performance aligned more closely with large caps, after outperforming them in FY24. The report described FY25 as a "year of reconciliation" where several trends from FY24 moderated. Profits, revenues, and capex all grew by around 8-10 per cent, returning to pre-COVID trends. Looking ahead, the outlook for FY26 remains uncertain. The report noted that earnings estimates for FY26 have been downgraded by 2 per cent, and one-year forward earnings per share (EPS) projections have stagnated, similar to trends seen before the pandemic. Nuvama said the Street currently expects 15 per cent earnings CAGR for FY25-27, but flagged downside risks due to weak demand, slowing credit growth, corporate cost-cutting, and uncertain export conditions. In summary, FY25 marked a slowdown for India Inc, with all major financial indicators reconciling with a subdued top-line performance, and the outlook for FY26 remains cautious.
Mint
06-06-2025
- Business
- Mint
India Inc's report card: Headwinds take a toll in Q4
The Q4 earnings season has come to an end, with multiple sectors impacted by weak consumer sentiment, margin pressures and global macroeconomic uncertainties. However, some did well. Mint takes a look at the key trends which shaped this results season. Also read: Expect consumption revival in FY26; positive on BFSI, healthcare, says Amit Premchandani of UTI Mutual Fund How did Indian companies perform in Q4 FY25? Nifty 50 earnings per share (EPS) grew 4.9% on-year in Q4, against expectations of a decline. Excluding financials, EPS grew 10.5% on-year. About 80% of Nifty companies either beat or posted in-line earnings, as per Axis Securities. However, beyond the top 50 firms, growth headwinds were more prevalent. Q4 profit after tax for BSE 500 (excluding oil marketing companies) grew to 10%, even as revenue stayed weak, noted Nuvama Institutional Equities. The improvement was due to cost rationalization and a low base. Revenue growth at 9% was in single digits for the eighth consecutive quarter. What were the key trends this season? Continued headwinds in consumption meant subdued revenue growth. Post-covid, profit recovery has been mainly led by margins rather than revenue. The margin improvement was a result of factors like cost efficiencies, benign credit costs and cooling input price pressures. However, with margins for most sectors being close to decadal highs, the room for further improvement looks limited. Additionally, in the backdrop of weak demand, India Inc. is cutting costs aggressively. BSE 500 companies' wage bill growth has slowed further to just 5% YoY in Q4 FY25 — a post-covid low, Nuvama said. Also read: Mumbai auto driver earns ₹5–8 lakhs a month: 'No MBA, no startup, just pure hustle' How are various sectors placed at this juncture? Value retail, jewellery and premium real estate grew, but broader consumption was stressed, especially in urban markets, affecting consumer staples and auto sector. Banks and NBFCs felt pressure on net interest income amid slowing loan growth. IT firms reported an in-line set of numbers, but macro challenges in US and Europe triggered downgrades for FY26/27. How did mid- and small-cap firms do? After outpacing large-caps in FY24, profits of small- and mid-caps (SMIDs) reconciled with larger peers in FY25, posing a risk to elevated valuations. SMIDs' PAT growth fell to 9% in FY25 from 24% in the last year. For FY26, consensus forecasts a significant bounce in SMIDs' profitability compared with large caps. 'We think they could disappoint as growth is slowing down in a broad-based manner with even domestic indicators—credit growth, auto sales and real estate sales—slowing," Nuvama analysts noted. Also read: Employee with broken leg told to return to work with 'we can give you a chair'; he resigns What is the earnings outlook for India Inc? Most brokerages cut their earnings projections on demand slowdown, moderating credit growth, cost-cutting by corporates and tariff uncertainties. But they still expect Nifty to deliver mid-teens earnings growth in the next two years. JM Financial projects Nifty 50 EPS to grow 12% in FY26, compared with the earlier 16.4% estimate and 14.3% in FY27. Sectors which may do the heavy lifting are consumer, telecom, metals, mining, oil and gas and banks. Experts also note market valuations are expensive, which may cap the upside.
