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* Corporate earnings for April-June 2022 (Q1FY23) came in muted, primarily tracking pressure on gross margins during the quarter amid ongoing geopolitical conflicts and improving supply chain dynamics. Topline growth at the Nifty level (ex-financials) was at 3.3% QoQ. Operating profit, however, was down 7.2% QoQ factoring in pressure on margins, which for the quarter was at 16.2%, down 184 bps QoQ. Gross margin decline came in sharp at 280 bps QoQ. PAT in Q1FY23 was down 16.8% QoQ, primarily tracking a decline in margins as well as lower other income (as most companies reported MTM loss on investment book due to rise in yields), further aggravated by higher effective tax rate (29.5% in Q1FY23 vs. 26.1% in Q4FY22). On a YoY basis, topline, bottomline growth at the index level was healthy at 39% & 11%, respectively, tracking commodity prices led gains in the metals and oil & gas domain as well as impact of Covid second wave in the base quarter (April-June 2921). Management commentary across businesses was positive on demand outlook and with recent cool off in key commodity prices was hopeful of margin recovery, going forward

* At the Nifty level (including financials), broader sequential trend continued with 1.4% QoQ growth in topline while PAT was down 13% QoQ, a tad lower than ex-financials subset (16.8% QoQ) on account of outperformance by the BFSI domain wherein asset quality trend continued to improve led by healthy recoveries and steady incremental slippages. GNPA ratio for banks in our coverage declined in the range of 6-35 bps with average drop being at ~10 bps. Even on absolute basis, GNPA declined ~1% QoQ, 12.1% YoY for the banking sector

* Incorporating revised PAT estimates post Q1FY23, our forward earnings estimates witnessed a decline of ~2%. Over FY22-24E, albeit on a high base, Nifty earnings are seen growing at a CAGR of 13.3%. We now value the Nifty at 19,425 i.e. 21x PE on FY24E EPS of | 925 wherein we marginally increase our PE multiple to 21x vs. 20x earlier tracking cool-off in commodity prices and consequent positive impact on inflation and resultant modest rate hike velocity by central banks vs. the aggressive stance depicted earlier

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