1. Nifty companies earnings beat street estimates in Q2 but it might not be enough

Nifty companies earnings beat street estimates in Q2 but it might not be enough

Analysts point out that it has been an excellent quarter in terms of numbers, however, these are merely early signs of recovery and stronger growth will be needed to sustain the rally in markets.

By: | Updated: November 20, 2017 11:02 AM
Nifty, nifty benchmark, sensex Nifty companies have reported better than expected earnings in Q2, say analysts. (Image: Reuters)

As all the Nifty heavyweights have declared their quarterly results, analysts point out that it has been an excellent quarter in terms of numbers, however, these are merely early signs of recovery, and stronger growth will be needed to sustain the rally in markets. In an interview to CNBC TV18, Saurabh Mukherjea said that Q2FY18 has been a solid earnings season, however, the year may not see any double digit earnings growth. While dissecting the earnings in Q2, Krishna Kumar Karwa, Managing Director at Emkay Global Securities said recently, “ Out of the companies under coverage at our end, almost hundred companies have announced their results. There have been target price upgrades on at least 50 companies, which is much more than what was happening in last quarter or few quarters ago. Even on the EPS upgrades, in 40-45 companies have seen them in FY-18 and FY-19. My sense is that the numbers have been better than expected.”

On similar lines, Taher Badshah CIO (Equities), Invesco Mutual Fund said in an interview to ET Now earlier this month, “One should dissect the earnings to see how many companies are actually over-delivering, or beating street estimates versus earlier. An analysis of the 35 companies of Nifty which have delivered results so far, 75% of them have actually beaten street estimates, or at least met them. This number was closer to 55% in the last four or five quarters. This is a better way to track earnings delivery versus expectation, and I believe on that front, things seem to be getting better.”

However, even though the number have been better than anticipated India Inc will have to wait until FY19 to actually post meaningful double digit earnings growth says Saurabh Mukherjea. He pointed out that it is unlikely that FY18 will witness double-digit earnings growth. Further, he says that companies will witness double digit growth only if the PSU bank recapitalisation happens sooner rather than later, as credit offtake is necessary to fuel growth. He expects companies to report 15% growth in FY19.

In this quarter itself, while the quarterly numbers are either in line or better than expectations, the first half taken as a whole hasn’t seen growth. “If you look at the first half numbers in totality (in the first half), there hasn’t been growth in the EBITDA level so far. So hopefully we will see some growth in the next half as we go forward,” Sanjeev Prasad Co-Head and Managing Director, Kotak Institutional Equities said in an interview to CNBC TV18.

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