Market Rewards Firms with Remarkable Q4 Performance

It seems that market has rewarded companies which have reported a performance better than expected in the quarter ended March. Asian Paints, Biocon, Bajaj Auto, Finolex Cables, ITC, Hero MotoCorp, V-Guard Industries, Tata Motors, and Zee Entertainment Enterprises are among 54 stocks that have hit 52-week highs in past two weeks.
An analysis of 844 companies from the BSE 500, mid and small-cap indices (excluding state-owned banks and refineries) that announced their March quarter earnings reveals that stocks of 316 companies outpaced the benchmark indices after the results.
These 316 firms have reported 31 per cent year-on-year (y-o-y) growth in their aggregate net profit. On the other hand, the remaining 528 companies that underperformed the market have recorded 25 per cent y-o-y drop in their combined net profit.
According to analysts, major earnings surprises were from Tata Motors, L&T, UltraTech Cement, Nestle India, Kotak Mahindra Bank, Mahindra & Mahindra Financial Services, Hindalco, JSW Steel, Bharat Petroleum Corporation, Tech Mahindra, Bharti Airtel and Idea Cellular. On the other hand, they were disappointed by ICICI Bank, Bank of Baroda, Britannia, Maruti, BHEL, Cipla, Dr. Reddy’s, Titan, and Coal India’s numbers.
Markets, too, acknowledged the performance. Tata Motors, L&T, Hindalco Industries, YES Bank and HDFC gained around 15 per cent each as compared to a less than six per cent rise in the benchmark index after the March quarter results.
“The results were better than expected. About 46 per cent of Nifty companies beat our estimates. This was better than 36 per cent in the December quarter, and the highest in nearly three years after the 50 per cent reached in the second quarter of the financial year 2013-14 (Q2 FY14). On the other hand, 34 per cent missed our estimates, the lowest since Q1 FY15. After many quarters, several sectors like energy, telecom, utilities, discretionary and cement saw earnings upgrades,” says Neelkanth Mishra, managing director-equity research, Credit Suisse.
Even though it remains mindful of key risks such as the rise in commodity prices, especially oil, progress of monsoon, interest rate trajectory, etc. Still, looking at the numbers, it is suggested by the analysts that the better picture is in formation for India Inc.

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