Q4 preview: earnings remain fragile as margins crack under cost pressures

Nifty 50 revenue growth at 10–13% year-on-year in Q4, broadly maintaining Q3’s momentum. But the nature of revenue growth is expected to have changed during the latest quarter.While festive demand, tax cuts and discretionary spending supported revenues in the October-December quarter, the March-quarter growth is likely to be driven more by higher realisations in metals and energy, even as underlying consumption trends turn uneven.

This makes the quality of growth more fragile than the headline numbers suggest.Shrikant Chouhan, head of equity research at Kotak Securities, said metals and mining should see a strong quarter, aided by higher copper and aluminium prices, while information technology services may get margin support from the rupee’s continued weakness against the US dollar.Tata Consultancy Services last week reported a 12% year-on-year rise in net profit for Q4, bouncing back from Q3’s near-14% fall. The IT giant was aided by currency tailwinds, improved operational efficiency, and the absence of one-off labour code costs which had weighed on the previous quarter’s bottom line.But from Nuvama Institutional Equities to Axis Securities and JM Financial Services, there is broad agreement that the era of operating leverage-driven earnings growth is over.

Companies are entering a phase where rising raw material costs are harder to pass on, especially in an uneven demand environment.The consensus suggests festive momentum has faded, with consumers shifting from discretionary to essential spending. Consumer durables and apparel, which saw strong demand in Q3, have witnessed a post-festive slowdown.

Nuvama flags FMCG as a weak pocket, with earlier margin cushions gone and growth now reliant on soft volumes. Cement and