Q1 earnings review: Consumption slowdown dents Nifty companies’ profits; IT, private banks shine

By: |
Updated: August 30, 2019 12:21:47 PM

Even as the ongoing slowdown took a toll on earnings of heavyweight firms the Nifty delivered a tepid 5% earnings growth for the quarter.

kashmir sensex, markets kashmirThe Nifty delivered 5% earnings growth for the quarter versus our estimate of 12%

Even as the ongoing slowdown took a toll on earnings of heavyweight firms the Nifty delivered a tepid 5% earnings growth for the quarter. Brokerage firm Motilal Oswal had expected earnings growth of 12%. “The 1QFY20 corporate earnings-report was below our expectations for both the Nifty and the MOFSL Universe.  The Nifty delivered 5% earnings growth for the quarter versus our estimate of 12%,” Motilal Oswal noted in its latest report. Domestic Cyclicals continued driving earnings growth for the third consecutive quarter, led by Financials, which contributed almost the entire earnings delta but still fell short of expectations, said the firm.

Also read: Share Market Today Live: Sensex under pressure, Nifty below 10,950; VEDL, Tata Steel top gainers

What is interesting in the analysis is that the the intensity of downgrades went up with 93 companies witnessing 3%+ earnings cut (v/s only 30 companies witnessing 3%+ earnings upgrades). “We had cut our Nifty EPS estimate by 4% to Rs 560, and now expect 13%/16% profit/EPS growth in the Nifty for FY20, singularly led by corporate banks  Corporate commentaries have weakened across the board, especially on the Consumption front, as the impact of economic slowdown, coupled with muted sentiment, is reflected in demand,” the firm noted.

Watch: File ITR-1 in less than 15 minutes

Interestingly, private banks and IT firms have reported robust numbers, as opposed to the larger trend. In case of banks and financial institutions, the asset quality situation has worsened sequentially with several banks witnessing higher slippages and guiding for new stress accounts in the Apr-Jun period. Many banks have guided for a moderation in loan growth, led by economic slowdown (both consumption and capex remain weak), tight liquidity and high promoter leverage (which has resulted in higher number of defaults), observed the report. “SBI, Axis Bank and RBL reported an increase in stressed assets to select corporate groups (resulting in an increase in credit cost estimates), while ICICI Bank, HDFC Bank and Kotak Mahindra Bank delivered a steady performance.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Exim Bank raises 32 billion yen through Samurai bonds
2ICRA Report: High stocks to hit sugar prices despite likely decline in output
3Inclusion of Nestle to help boost Nifty50 P/E by 20 bps in FY20