Sector Updates

The life insurance sector is poised to deliver a strong performance in Q4FY25E, supported by a
seasonal surge in new business volumes and steady growth in renewal premiums. However,
margins are expected to remain broadly stable or may see slight compression due to product mix
and pricing dynamics.

In the long term, we prefer TVS Motors and Hero Motocorp in 2Ws; M&M (non-coverage) as a play in the PV/LCV/tractor segment, followed by Maruti in PVs. We also keep a close watch on Ashok Leyland and Eicher (VECV) in the CV space for potential volume growth

Auto industry sales in Q4FY25E exhibited a mixed trend. January recorded healthy traction, supported by beginning-of-year momentum and ongoing promotional schemes. However, demand gradually tapered in February and is expected to remain muted in March, with no major catalysts to drive retail acceleration.

In February 2025, the mutual fund industry's net AUM declined from INR 67.25 Tn to INR 64.53 Tn, despite reporting net inflows of INR 400.6 Bn during the month. The contraction was primarily due to valuation losses in equity-oriented funds, which offset the positive impact of inflows.

The demand environment in Q3FY25 reflected early signs of stabilization, with slightly improved Total Contract Value (TCV) momentum, supported by small and mid-sized deal conversions. However, large deal closures remained muted, indicating that enterprises continue to maintain a cautious stance, particularly for discretionary-led digital transformation initiatives.

Consumption trends in Q4FY25E remained mixed, with staple companies expected to report marginal volume growth. Inflationary pressures on discretionary spending weighed on major FMCG players such as HUL, Nestlé India, Britannia, and Tata Consumer Products.

As per AIOCD and AWACS data, in January 2025, the Indian pharmaceutical market (IPM) grew 8.7% YoY, led by price hikes (+5.3%) and new launches (+2.6%), but posted muted volume growth (+0.9%). In February 2025, the Indian pharmaceutical market (IPM) grew 7.5% YoY, driven by price hikes (+5.2%) and new launches (+2.7%), while volume declined marginally (-0.2%).

We anticipate industry credit growth to moderate to ~11.0% by end of FY25E, marking a sharp decline from 20.2% in FY24. This slowdown is largely attributed to a deceleration in unsecured loan expansion and persistent stress in the Microfinance (MFI) segment, which has prompted a more cautious lending approach across the sector.

YoY organic growth is expected to decelerate from ~4.5% in 2QFY25 to 0.5% in 4Q. Implies a US$2.6bn annualized organic revenue loss