Q3 Results Report Card

The most important stock price influencer is the earnings growth. The Q3FY19 earnings have not been disappointing, but these have failed to meet the growth investors' expectations. Shohini Nath and Yogesh Supekar evaluate Corporate India’s performance in the latest earnings season.

- Shohini Nath & Yogesh Supekar

This earnings season (Q3FY19), the performance of Corporate India has got nothing that can disturb the investors, but there is also very little to cheer them up. Corporate India has failed to live up to the expectations of the growth investors once again in the December quarter. The robustness in earnings was missing, which is required by the growth investors to pump in money into the Indian equities. The previous few quarters provided excuses such as demonetization and GST for sluggish growth. This quarter, the markets expected a much smarter growth from India Inc.

One can surmise that the IL&FS saga and the impact of higher crude oil prices weighed on the markets in the previous quarter. The higher borrowing cost and increased raw material prices impacted the latest quarterly performance of the companies. While the sales grew by a healthy 20 percent for Nifty companies, the net profits adjusted for one-time exceptional items grew by a mere 4 percent. This goes to reflect on how tough the competition is getting for Indian businesses. Poor profitability was also due to the increase in raw material prices.

Chetan Nayani, who has been tracking earnings of listed stocks for almost 10 years now, says “Honestly, the earning have not met growth expectations of investors since last five-odd years. Every year, in the beginning of the year, there is hope built into the investors' expectations of healthy growth in earnings. It has not been coming since last five years, and the recent performance, while it is not bad, does look like it is not good enough to cheer up growth investors. Growth has to pick up for stocks to meet investors' expectations.”