September quarter for Nifty companies is expected to be weak in terms of earnings

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Mumbai, Ta. 09 October 2019, Wednesday

The September quarter of the current fiscal year is expected to be the worst of the last few years in terms of corporate earnings, if the estimates of known brokerage houses are true. In areas such as automobiles, energy, mining and metals, sales volumes have declined.

For the second quarter ended Nifty, the combined net profit of the 3 companies is projected to decline by 8% annually, which would prove to be the worst quarter for the last three years, excluding the December 1 quarter. The one-time loss shown by Tata Motors resulted in a 7.2% drop in revenue for the Nifty 3 companies in the quarter ended December 5.

The combined sales of the Nifty 4 companies are down by about 8% annually, which is expected to be the first time in the last 3 quarters. A leading brokerage house has estimated that the combined net profit of Nifty 4 companies would be reduced by 7.5 percent if banks and money and oil and gas companies were excluded.

The combined sales of these companies are seeing a decline of 5.5 per cent, the first decline in the last three quarters. The various incentive measures announced by the central government last month and the continuous reduction in interest rates by the Reserve Bank do not appear to have immediate benefit.

As the measures taken by the government are structural in nature, their impact is likely to be long-term, though demand for consumer goods has not improved yet, said one analyst.

Indicators with high frequency of investment and consumption indicate that the economy has experienced a slowdown in the last 6 to 6 months. The sluggish consumption demand and lower returns through commodities have reduced the earnings of Nifty 3 companies.

Estimates from analysts suggest that the position of automobiles and metal companies will be very poor, while net sales or net interest income and net profit of private sector banks and pharma companies may be doubled.

It is worth mentioning here that in the last few years, the finance ministry has taken steps to provide comprehensive concessions to the companies in order to increase demand in the country so as to reduce the cost of goods and services. In addition to the government, the Reserve Bank has also reduced the repo rate by 5.5% in the current calendar year.

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