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Nifty 50 earnings grew 17% YoY in Q3, but analysts’ tone cautious; here’s why

February 16, 2024 - 2:01pm
It was yet another strong quarter for India Inc as most companies reported better-than-expected numbers for the three months ended December, triggering further upgrades in earnings.Earnings of companies that are part of the Nifty 50 grew by 17% year-on-year (YoY), against expectations of an 11% growth, according to Motilal Oswal Financial Services.However, the overall growth was slower in the December quarter, compared with the September quarter.Five Nifty companies – Tata Motors, HDFC Bank, Tata Steel, ICICI Bank, and JSW Steel – constituted 56% of the incremental accretion in earnings, the brokerage firm said.Domestic cyclicals such as automobiles and financials continued to propel the overall earnings growth, while they were also joined by global cyclicals such as oil and gas and metals. The only heavyweight sector to disappoint was information technology, with the overall earnings seeing a decline for the first time in 26 quarters.Banking, financial services, and insurance, or BFSI reported a healthy 22% YoY growth in earnings, while the automobile sector registered a 60% growth. For companies in the metal sector, profits rose sharply on the back of easing cost pressures and a low base of last year.Meanwhile, oil marketing companies’ profitability surged 4.6 times YoY in the last quarter due to strong marketing margins. So, the aggregate operating profit or EBITDA increased by 10% YoY in the last quarter. Despite the good show by companies, Motilal Oswal pointed out that the earnings upgrade-to-downgrade ratio turned weaker for FY25. While for 58 companies earnings estimate was upgraded by over 3%, 84 companies saw an earnings downgrade of over 3%.“The earnings upgrade/downgrade ratio of 0.6x was the worst since 3QFY22,” the brokerage firm said. Nevertheless, analysts see a double-digit growth in earnings for both FY24 and FY25.“We expect net profits of the Nifty 50 index to grow 18.9% in FY24 and 10.2% in FY25,” said Sanjeev Prasad of Kotak Institutional Equities.Pain PointsEven though the companies reported strong growth in profits in Q3, this was primarily due to easing cost pressures and higher realisation. Consumption demand remained weak for fast-moving consumer goods and discretionary companies, which saw muted volume growth, whereas premium real estate witnessed strong investment demand.“The dichotomy reflects continued challenges of low-income households (low income, high inflation) and decent financial condition of high-income households,” Kotak’s Sanjeev Prasad said. Prasad expects consumption demand to recover only gradually over the next 2-4 quarters.(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)
Categories: Business News

Surya Namaskar now mandatory in Rajasthan schools

February 16, 2024 - 1:14pm
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15% CAGR and 15% market share is Blue Star goal

February 16, 2024 - 1:03pm
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PM's degree: Pleas against defamation case rejected

February 16, 2024 - 12:45pm
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UNO Minda sure of delivering 1.5x industry growth

February 16, 2024 - 12:41pm
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SBI in talks to cut CRR norms for green deposits

February 16, 2024 - 12:40pm
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Macro, mania and Modi may support overvalued Indian stock market: Kotak Equities

February 16, 2024 - 12:09pm
While arguing that most sectors and stocks are quite overvalued, domestic broking firm Kotak Institutional Equities today said the disconnect between price and value may sustain given India's decent macro position, retail investor-led mania on Dalal Street and expectations of PM Modi retaining power after Lok Sabha elections.However, as investors are happy to overpay for weak business models in a few cases and unsustainably high profitability in others, there is only greed and no fear left in the market, said Sanjeev Prasad of Kotak Equities."We find most sectors and stocks quite overvalued with the degree ofovervaluation ranging from low for most largecap consumer, IT services and pharmaceuticals to medium in the investment space to high in the case of several low-quality companies," he said, adding that among the larger sectors, the financial sector is the only exception with most stocks trading at reasonable valuations.The December quarter earnings season was modestly ahead of expectations as Nifty profit rose 13.8% YoY."Higher-than-expected profits of the oil PSUs (downstream companies) were offset by one-off provisions of SBI. We expect net profits of the Nifty50 index to grow 18.9% in FY2024 and 10.2% in FY2025," Prasad said.Valuation worriesKotak said it finds most sectors and stocks quite overvalued in the context of historical valuations coupled with the Street’s high assumptions for profitability in the short term, which may not sustain and weak business models and/or emerging risks to even hitherto strong business models in the medium term.Also Read | Warning signs flash for over 100 smallcap multibaggers. Is it a bubble waiting to burst?"We note large downside risks to earnings in the event of profitability being lower than the Street’s and our lofty expectations. The high valuations of the stocks in automobiles & components, consumer durables and apparel, commodity chemicals and oil, gas & consumable fuels (downstream refining and marketing companies) sectors would suggest that the market does not expect any decline in profitability from current super-normal levels," the brokerage said in a note.Analysts at the brokerage expect a gradual derating in multiples of most consumption- and investment-related sectors over time as the disruption risks start to play out.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
Categories: Business News

How will electoral bond ban affect BJP?

February 16, 2024 - 12:06pm
India’s Supreme Court has ruled that political parties can no longer raise funds using anonymous donation instruments called electoral bonds. These bonds were not actual tradable instruments but allowed for contributions to be made by individuals or companies to a political party through a banking channel. The controversial element — which led to the court case — was a government decision to keep the donors anonymous.Also Read: SC unanimously strikes down poll bonds scheme, terms it ‘unconstitutional’What did the court decide?The court decided that contributions made for political funding cannot be anonymous and the electoral bonds are no longer a valid mode for donating to political parties. Voters, said the court, have the right to information that is necessary for them to cast their vote. Giving anonymity to donors making large contributions goes against that fundamental right. Large corporate donors could get quid pro quo benefits from their anonymous contributions, including closer access to legislators and favorable policy decisions. By removing disclosure requirements the scheme could adversely impact India’s electoral democracy. The court went on to rule that the absolute non-disclosure of funding needs to be done away with. The scheme is arbitrary and against India’s constitutional principles and needs to be struck down, country’s top judge D. Y. Chandrachud said, while pronouncing the order on behalf of the five-judge bench.Also Read: BJP took home lion's share of Rs 16,000 crore political fundingWhat are electoral bonds?Electoral bonds are paper instruments issued by the government-owned State Bank of India to facilitate political donations through a banking channel. These instruments are issued in the denominations ranging between 1,000 and 10 million rupees and sold at least four times each year. An individual or a company could buy these bonds in favor of the political party they want to donate to by paying the corresponding value to the bank. The donor’s identity was not disclosed through this mechanism. Parties could then cash the bonds issued in their favor as and when required. The issuing bank, in theory, was the only entity which had the details of all donors. The scheme drew criticism, however, on grounds that the given the bank is run by the government, the ruling party could also have access to this data.What does this mean for political funding?This decision is significant and timely and is expected to make India’s elections relatively more transparent. All parties are required to disclose the identity of donors who make contributions worth more than 20,000 rupees ($240.92) in cash. This mandatory disclosure was done away with if the donation was made through electoral bonds. That led to this instrument becoming a significant mode for contributions. With the court directing that non-disclosure of funding source cannot be permitted under the law, the funding process is expected to, or at least hoped to, become more transparent. To be sure, there are no curbs on the absolute amount of political funding and can still be carried out through other means.How does this affect Narendra Modi’s Bharatiya Janata Party?While the court verdict impacts funding across party lines in Indian politics, it can be seen as a blow to the ruling party particularly. After the scheme was introduced in 2018, it emerged as the preferred mode for big corporations to anonymously donate to political parties. The biggest beneficiary of the scheme was the BJP, which mopped up nearly 13 billion rupees in funding through electoral bonds in FY 2022-23. In contrast, its main rival the opposition Indian National Congress, got 1.7 billion rupees, according to audited annual accounts reports submitted to the country’s election commission. While the court’s decision may not have an immediate impact on the party’s fiscal situation, it is an indictment of a scheme championed by the BJP — and a blow to its anti-corruption credentials, which it has touted to great electoral effect over the past decade.
Categories: Business News

Sonia Gandhi has Rs 12.53 cr in assets, no car

February 16, 2024 - 12:03pm
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Shed historical baggage; 4 spaces to look for value

February 16, 2024 - 12:00pm
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Technical Stock Pick: Is Astral in a new bull market? What does the chart suggest?

February 16, 2024 - 11:25am
Astral Ltd, part of the capital goods industry space, recouped losses after hitting a record high in August 2023 and is now trading above most of the crucial short- and long-term moving averages which suggest that bulls are here to stay.Short-term traders can look to buy the stock now for a possible target of above Rs 2,200 in the next 4-6 weeks, suggest experts.The stock hit a record high of Rs 2057 on 4th August 2023, but it failed to hold on to the momentum. It witnessed a price-wise correction.“The stock has started to move in favour of the larger uptrend after the completion of the 8-month corrective phase. The stock price has started exhibiting higher highs and higher lows suggesting the emergence of a fresh uptrend,” Aditya Thukral, Founder & Analyst for AT Research & Risk Managers, said.“Now that the prices are gradually moving higher along with the pickup in volumes which suggests the move is now in favour of bulls and the prices are ready for a fresh breakout of 52-week highs,” he said.The stock took support above 1700 levels in January 2024 before bouncing back. The stock rose more than 3% in a week and over 7% in a month.The recent momentum helped the stock to trade above crucial short- and long-term moving averages, such as 5,10,30,50, and 200-DMA on the daily charts which is a positive sign for the bulls.If the momentum sustains the rally could stretch towards 2200 levels, suggest experts. On the downside, levels above 1700 will act as crucial support, suggest experts.“The stock ticker is in an uptrend with the formations of higher highs and higher lows on the long term and short-term charts,” recommended Thukral.“An uptrend continuation is expected to happen in the stock prices where longs should have a stop loss below 1785 on a weekly closing basis which is the lowest weekly close of the whole corrective structure,” he said. 107743453The stock is well placed above all the major exponential moving averages viz. 50-day, 100-day, and 200-day.The daily Relative Strength Index (RSI) is placed at 59.4. RSI below 30 is oversold and above 70 is considered overbought, Trendlyne data showed. The daily MACD is above its center and signal Line, this is a bullish indicator.“This might be the start of a new bull market in the stock and conservatively, one can easily expect the levels of 2230 to be seen in the coming 4 to 6 weeks,” recommended Thukral.“The positioning of RSI on daily as well as weekly charts is still below 60 and provides enough room for longs to enjoy further upside in the stock,” he added.Analyst Disclaimer: SEBI Registration No. INH000013794. The Research Analyst and its associates/relatives may from time to time, have a long or short position in the securities or derivatives thereof of companies discussed herein.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Categories: Business News

HDFC Bank's outperforming chances up: Sabharwal

February 16, 2024 - 11:09am
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Delhi market fire: Factory owner booked

February 16, 2024 - 11:02am
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Discounts help Feb cotton exports to hit 2-yr high

February 16, 2024 - 10:24am
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Vedanta stock of the yr? Bandhan may double: Bhasin

February 16, 2024 - 10:12am
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Indian Army opens fire at Pakistani quadcopters

February 16, 2024 - 9:42am
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India steel mills most at risk from EU carbon plan

February 16, 2024 - 9:38am
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