The overall slowdown in consumption as evidenced by the recent auto sales numbers of the past few months has cast a shadow on the market trajectory.
The recent uptick in Indian equities was on the back of hopes of a stable government, a pick-up in economic activity amid benign oil prices that would help prop up corporate earnings growth in financial 2019 – 20 (FY20). However, some analysts have started to trim consensus earnings growth estimates, which until recently, were pegged close to 20 per cent for FY20.
Consumption growth trend is sluggish. Job creation is weak. Fiscal constraints and external uncertainties pose downside risks to near-term economic growth and corporate earnings, analysts say.
“The pre-election FY20 interim budget prioritised populism over fiscal prudence with a pause on fiscal consolidation. The new glide path does not change the original target of achieving 3 per cent of GDP by FY21, but the credibility of the target is questionable. Earnings risks and political uncertainties given ongoing elections could keep near-term market volatility high. Any significant increase in crude oil prices is a key risk,” says a recent report by HSBC Global Asset Management.
Amid this, 28 companies that are listed on the BSE reported a turnaround performance in the March quarter of financial year 2018 – 19 (Q4FY19) at the net profit level on a standalone basis as compared to the previous corresponding period, shows data from ACE Equity. These include Great Eastern Shipping, Indiabulls Real Estate, Tata Power, Majestic Auto, Mastek and Kopran.
Axis Bank, Bank of Maharashtra, PTC India Financial Services, Dhanlaxmi Bank, Aditya Birla Capital and The Investment Trust of India are the six companies from the banking and financial services segment that comprise these 28 turnaround entities.
"Private Banks continued reporting steady trends in loan growth, while the margin trajectory remains mixed. Asset quality has been largely stable for retail banks, but Yes Bank has reported higher NPL formation and disclosed a watch-list of standard stressed assets. Axis Bank and ICICI Bank have continued improving their provisioning coverage and guided for normalisation in credit cost from FY20, which will drive their return on equity (RoE) expansion," says Gautam Duggad, head of institutional reserach at Motilal Oswal Financial Servcies (MOFSL).
At a broader level, of the 19 Nifty50 companies that have announced their earnings, 15 have either met or exceeded estimates of analysts at Motilal Oswal on both the profit after tax (PAT) and earnings before interest, taxes, depreciation and amortisation (EBITDA) front.
"The earnings upgrade/downgrade ratio is less than 1, with 14 MOFSL Universe companies witnessing upgrades of over 3 per cent and 26 witnessing downgrades of more than 3 per cent, indicating the continued weak underlying earnings momentum. For the MOFSL Universe, sales, EBITDA and PAT grew 11.9 per cent, 5.7 per cent and 9.5 per cent year-on-year, as against our estimates of 16.6 per cent, 4.1 per cent and 9.8 per cent YoY, respectively," Duggad says.
|Company Name||March 2019 quarter PAT||March 2018 quarter PAT||Price (Rs)||M-Cap (Rs cr)|
|The Great Eastern Shipping Company||135.61||-13.44||267.75||4037.1|
|Indiabulls Real Estate||126.927||-7.156||97.95||4414.4|
|Bank Of Maharashtra||72.38||-113.51||15.05||8765.3|
|Tata Power Company||53.86||-3939.12||64.5||17445.8|
|PTC India Financial Services||36.757||-264.679||16.05||1030.9|
|Orient Green Power Company||20.111||-18.524||3.86||289.8|
|Aditya Birla Capital||6.52||-9.88||98.45||21672.9|
|The Investment Trust of India||5.195||-2.337||143.95||734.5|
|Landmarc Leisure Corporation||0.38||-0.247||0.39||31.2|
|Artemis Global Life Sciences||0.145||-0.175||59.75||395.5|
|Price, MCap on BSE as on May 8, 2019; Data source: ACE Equity|