Auto, oil & gas join the party

Information technology and pharma continue to remain outliers

In a quarter when average net profit growth across sectors was 35 per cent, four sectors have been clear outperformers, with earnings growth upwards of 45 per cent. Boosted by export revenues, pharma and IT again came to the bulls' rescue justifying their stance on the stock market. Outlook for both remains positive thanks to a continued weakness in the rupee and economic recovery in their key markets in North America and Europe. Pharma majors have an added advantage of a domestic demand recovery after a poor show last year.

The other two sectors that stole the show were automobile makers and auto ancillaries where demand is picking up and government-owned oil marketing companies (OMCs) that gained from a decline in diesel subsidy and currency gains on a sequential basis. Standalone refiners also gained from a slight recovery in gross refining margins.

In the auto space, Tata Motors was a clear standout performer, thanks to its UK-based subsidiary Jaguar Land Rover. (Click for tables)

In the two-wheeler space, TVS Motors was an outperformer with a profit growth of 39 per cent on revenue growth of 31 per cent over a year. Margin performance was, however, mixed with two-wheeler companies hit by higher raw material costs while four-wheeler majors managed to scrape through by keeping a tight lid on sales & marketing costs (see sectoral boxes below).

In the software sector, TCS posted sector leading revenue and profit numbers. It was followed by HCL Technologies, which stole the show with net profit growth of 53.7 per cent on y-o-y basis to Rs 1,834 crore, driven by higher other income (due to a favourable rupee). Net profit of the other three biggies grew between 21.6 and 29.6 per cent, with Infosys reporting the lowest growth.

In the oil and gas segment, the good show was led by OMCs, thanks to a favourable rupee and higher marketing margins. While IOC and HPCL made net profit in this quarter as against a net loss in the June 2013 quarter, BPCL witnessed an eightfold jump in net profit. Weak crude oil prices and diesel price deregulation augur well for all state-run energy companies. While lower depreciation and interest costs pushed RIL's net profit ahead of estimates, ONGC missed the Street expectations as it reported higher write-offs.

Pharma continued its steady show, aided by strong sales in the US market on the back of a robust product portfolio which includes niche drugs and price hikes. The top line performance was led by Lupin, Cadila and Aurobindo. Sun Pharma disappointed due to one-offs at its US subsidiary Taro Pharma.