While many question whether the recent rally in equity markets is out-running fundamentals, the second quarter earnings from corporate India so far have suggested that earnings may be stabilising with no significant negative surprises being reported.
Nearly 40% of a group of 850 companies that have announced their September quarter results managed to post a positive profit growth over the same quarter last year, according to Bloomberg. Further, a subset of 100-odd companies from the BSE 500 universe for which analyst estimates are available has collectively beaten the earnings expectations by 0.5%, show Bloomberg data. The aggregate sales numbers of these companies were ahead of expectations by more than 6%.
About 55 companies from the subset reported a positive surprise in earnings while 43 failed to meet the earnings expectations. Most of the positive surprises have come from the media and financial sectors, while real estate, industrials and power utilities companies failed to meet the earnings expectations.
As a whole, private sector banks managed to meet the Street estimates with the earnings of Kotak Mahindra Bank beating the Street estimates by a modest 1.1%.
Among other financial sector players, L&T Finance holdings, Development Credit Bank, IDFC, South Indian Bank and Indian Overseas Bank managed to surpass analyst expectations by up to 40%. Net profits of Zee Entertainment, HT Media and PVR were also ahead of expectations. However, the real estate space continued to disappoint with actual sales and net profits of Oberoi Realty, DLF and Purvankara Projects falling behind analyst expectations. Adani Power and JSW Energy also posted negative surprise with net profit falling short of forecasts by bout 18% and 24%, respectively. Torrent Power and Indiabulls Power also reported a decline in net earnings.
Among the blue chips, all auto companies, including Bajaj Auto, Maruti Suzuki and Hero Motocorp, exceeded analyst estimates as a weaker rupee pushed up export earnings.
Even as volume growth concerns persist around the FMCG space, Dabur Industries, Asian paints and Berger Paints managed to top Street estimates by 5% to 20% in the September quarter. FMCG giants ITC and HUL disappointed the Street.