Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Stocks

Results: Nifty 50 Underperform Again; 48 Companies, Aggregate Profit Down 6%

Nifty-50-Results-Q2FY17-48-Companies.png

48 Out of the 50 Nifty companies have announced their September quarter results. Nifty aggregate profits are down by 6.04%, even with a revenue growth of 8.42%.
Here’s the chart, Click for the larger image.
nifty-50-results-q2fy17-48-companies
 

Winners and Losers:

  • Bank of Baroda has finally shown signs of improvement in its NPA. Currently the bank has scaled down its NPA and reported a 3 times increase in profits YoY.
  • Hindalco, which was suffering from stiff competition from Chinese imports and operational problems has reworked its strategies and improved its operational performance. Now the profits increased 2.5 times in comparison to previous year.
  • GAIL even with its  lower revenue growth managed to get a profit growth of 1.8 times. Lower international prices along with increased operating efficiency has been the contributing factor.
  • Tata Steel has taken a hit, though improving from previous quarters performance, but still it has been a drag down for overall Nifty results.
  • SBI, the bank which used to report profits in four digits has now come down to two digits. Profits are down 99%. The subsidiaries have been adding more bad assets to the loan book.
  • IDEA cellular’s profit has been falling continuously quarter on quarter. And Reliance Jio will hurt it some more.

squaread
Some might say so much of this is one-time etc. But when you have one-timers every quarter, you have to ignore the one-timers. We will never have a quarter without one or two companies showing a horrible set of results, but the idea is that the others make up for it. And for nearly six quarters now, we have seen very low profit growth or profit contraction in the Nifty companies, on aggregate.
For the previous quarter as well the profits were down by 9%. And with the demonetisation scheme around, their has been restricted cash flow among consumers, so lower spending is expected. This will show up in December quarter results, though the impact is unknown.
A correction in the markets, regardless of demonetization, should be expected.