Earnings will be restrained by slowing cos operating profit

“So far, the earnings season has looked pretty mixed, with 40% of companies reporting in the third quarter with an upgrade/downgrade ratio of 1:2,” said Manish Jain, fund manager at Ambit Assets. there are,” he said. Management team Big companies are seeing margins and revenue growth as sales volume growth slows, he added.

See the big picture

Price hikes by companies to offset inflation boosted revenue growth, even as weak volume growth hurt some profits. According to the data of 399 companies (excluding banks and financial companies) analyzed by the Bank of Japan, mintnet sales increased 15.9% year-on-year in the December quarter, the lowest in eight quarters.

Moreover, while cost pressures have eased in intensity, businesses continue to feel the impact of rising input costs.

Earnings before interest, tax, depreciation and amortization (PBIDT) increased by 1.5%. Raw material costs rose 14.5% year-on-year in the December quarter, moderated from his 40% rise over the past three months.

In addition, higher interest costs weighed on earnings, with net income down 3.8% year-on-year but up 11% from the previous September quarter.

The BFSI (Banking, Financial Services and Insurance) sector continued its stellar show.

Analyzing data from 495 companies, including banks and finance companies, net revenue increased by 15.9%, PBIDT increased by 14.5%, and net profit increased by 9.7%.

Analysts said that the small and medium-sized companies had a fairly robust growth due to their increasing market share.

Amnish Aggarwal, head of research at Prabhudas Lilladher Pvt., said earnings of some companies were only supported by softening raw material costs, and overall performance remains mixed.Ltd.

The December quarter also beat IT services expectations. Analysts had expected a slowdown in western markets to lower earnings forecasts for the quarter. Vigilance remains prevalent, but experts say his Tier 1 IT services firm outperforms in revenue performance.

VK Vijayakumar, chief investment strategist at Geojit Financial Services, said the banking and IT sectors are performing well.

HDFC Bank, ICICI, Kotak and Axis are all posting impressive numbers, and IT services are doing well despite concerns about the US economic slowdown, said Vijayakumar.

Infosys was excellent. IT services and financial performance are very important as these two segments contribute about 52% of India Inc.’s profit, he said.

Another standout segment was the automotive sector, with Tata Motors, Bajaj Autos and Maruti Suzuki India posting unexpectedly strong earnings. However, experts say the manufacturing sector still shows strain from rising interest costs.

“Although lower input prices have benefited sectors such as FMCG (Fast Moving Consumer Goods), margins are under pressure from rising interest costs. However, demand in the FMCG segment remains a concern. It is a matter,” said Vijayakumar.

Of the blue-chip stocks, Asian Paint and Pidilight were disappointing, he said.

A traditionally strong third quarter is important for businesses that rely on discretionary spending.

“In line with expectations, we saw strong demand for discretionary consumption companies during the quarter,” said Jain.

But rural demand remains weak, with growth led by the premium segment, Jain warned.

Another encouraging sign is that gross margins have started to improve sequentially as raw material prices stabilize, and the outlook remains optimistic, Jain said. Overall, quality-oriented and growth-oriented should return to the market, he said.

However, with optimism prevailing, the current quarter’s results may not be able to contribute much to the market’s rally. Aggarwal said the role of outcomes will be limited, with big events such as budgets driving the market.

Experts say it’s better to keep large caps safe in this challenging environment. Agarwal said tinkering with taxes on capital gains could put more pressure on mid- and small-cap stocks.