Q2FY27 Growth Holds Firm, Rising Costs Test Margins: Anand Rathi

Mumbai: Corporate growth momentum is likely to continue in Q2FY27 despite uncertainty from the West Asia crisis, according to Anand Rathi Research’s earnings preview. Strong automobile activity and faster lending growth should support performance, although elevated input costs could put pressure on profitability across several sectors.

The brokerage expects growth to sustain or accelerate in building materials, consumer durables, FMCG, specialty chemicals, hospitals, food delivery, quick-service restaurants and select retail businesses.

Auto Revenue Growth Seen At 27%

Anand Rathi forecasts 27 per cent year-on-year revenue growth for its automobile coverage, supported by higher production, premiumisation and price increases.

Most auto segments, excluding tractors, reported growth exceeding 20 per cent year-on-year.

Automobile EBITDA margins could improve by 20 basis points sequentially. A weaker rupee against the dollar and euro, price hikes and scale benefits should provide support, though commodity inflation could absorb these gains.

Banks Benefit From Faster Lending

Banks and non-banking financial companies recorded stronger loan growth, with bank credit growth accelerating to approximately 19 per cent.

Deposit growth also improved, aided by foreign currency non-resident deposit inflows. The brokerage expects net interest margins and asset quality to remain broadly stable, without movement in either direction.

However, banking profitability remains among the areas facing margin pressure.

IT Recovery Remains Modest

The top six IT companies are expected to post median sequential constant-currency growth of around 1.1 per cent, compared with approximately 0.35 per cent in Q1FY27.

Anand Rathi sees this as a seasonal improvement rather than a demand revival. Margins should remain broadly flat as rupee depreciation provides limited relief against wage increases, acquisition amortisation and AI spending.

Chemicals Grow As Cost Risks Persist

Specialty chemicals could deliver strong annual growth through firmer pricing, feedstock cost pass-through and recovering volumes. Sequential margins may weaken as inventory gains reverse and input and freight costs rise.

Margin pressure is also expected in cement, FMCG, consumer durables, paints, apparel and footwear retail.