Operating margins have been the primary driver of corporate earnings in India in recent quarters, despite revenue growth suffering from weak consumer demand. Companies across sectors have reported a sharp improvement in earnings before interest, tax, depreciation, and amortisation (Ebitda) margins over the past two years, benefiting from lower commodity and energy prices. Higher margins more than compensated for slower revenue growth, resulting in double-digit growth in net profit for five consecutive quarters.
Riding on strong June-quarter numbers and positive brokerage outlook, the stock of retail major Trent hit a fresh all-time high on Monday (August 14). The stock has gained 14 per cent in five trading sessions. Continuing the trend of strong revenue growth over the last few quarters, the company posted 53.5 per cent year-on-year (Y-o-Y) growth in top line to Rs 2,536 crore in the June quarter (first quarter of financial year 2023-24 or Q1FY24).
In addition to the negative sentiment as a consequence of changes announced in the Union Budget 2023-24 concerning tax treatment for debt repayment distribution, concerns about hiring slowdown and its leasing impact, as well as higher interest rates, could blight the sector in the near term.
There are multiple near-term worries for the stock of India's largest listed consumer company, Hindustan Unilever (HUL). While inflationary pressures will weigh on its profitability, demand pressures - especially in the rural market - are expected to hit the firm's revenues. This is why brokerages have cut the earnings estimates for financial year 2022-23 (FY23) by 7-10 per cent.
While domestic market growth is important, the sales trajectory in the international markets, which account for 45 per cent of the revenues, will be a key rerating trigger, say analysts.
With competitive pressures increasing at home, Bharti is making a third attempt to gain a foothold in the African market.
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Developers are tweaking their business model by launching smaller apartment sizes and playing the volume game to keep prices low and create buyer interest.
Distribution yields could rise, but risk of Covid, higher interest rates remain.
Given the expectations of growth in the packaged foods segment, the company seeks to become a Rs 1-trillion FMCG business by FY30.
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'Multiplexes will thrive by Q4 if 100% capacity is restored and a third Covid wave doesn't happen.'
While small-caps have delivered higher returns than their large-cap peers, investors would do well to recognise the incremental risk of investing in these companies.
These five stocks, which have lagged the markets over the last two years, have doubled in value since March 23.
With little clarity on the demand outlook, investors should wait out the next couple of quarters rather than rush in to catch a falling knife, says Ram Prasad Sahu.
The FPI holding in India's top 100 companies, which are part of the Nifty 100 index, declined to 24.23 per cent on average at the end of March this year, from a high of 27.5 per cent at the end of March 2021. This is the lowest FPI holdings in India's top listed companies in at least three years. A general sell-off by FPIs has weighed on stock prices and the benchmark S&P BSE Sensex is down 8.5 per cent, from its 52-week high made in October 2021. Most analysts expect FPI flows to remain weak in FY23 as well, given rising bond yields in the US and an expected earnings slowdown in India due to high inflation and commodity prices.
Check out some of the stocks that will react on the basis of their numbers in the near term.
Street may be ignoring TCS headwinds as the stock's peak valuation doesn't seem justified by BFSI weakness, likely higher US tax rates and stronger rupee, reports Ram Prasad Sahu.
These sectors are seeing a marked slowdown, as consumers are postponing purchase decisions amid uncertainty and severe cash crunch, report Ram Prasad Sahu, Sheetal Agarwal & Ujjval Jauhari from Mumbai.
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In a circular dated May 20, Sebi had directed the listed companies to evaluate the impact of Covid-19 on their capital and financial resources, profitability, liquidity position, assets, and ability to service debt. Instead, companies have spoken about the number of plants, warehouses and distribution centres that have resumed operations; work-from-home and safety measures undertaken for employees; and the labour shortage they are facing.
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Majority expect economy to slow down, but are satisfied with Modi govt's performance.
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Investment in market leaders with a safety-first approach could yield reasonable returns across sectors.
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It is advisable to stick to mid-caps with sustainable financial metrics rather than those offering the promise of faster growth.
Investors turn their attention to export-driven sectors.
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