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Rebound on the cards?

Initial results and preliminary analysis by Moneylife shows a possible rebound on the cards. However, it is too early to say anything concrete as yet. But the results are interesting nonetheless


A Moneylife research team has revealed that overall the earnings seasons for the December 2012 quarter have been positive so far. Moneylife analysed a database of 421 company results that have been announced, out of 1190 companies, and found out that cumulative net sales, operating profit and net profit all have posted positive numbers. Cumulative net sales of 421 companies, for the quarter ended December 2012, was at Rs5,97,864.1 crore, or 15% higher than the corresponding period last year. Surprisingly, net profit recorded a steep 56% increase for the third quarter of the 2013 fiscal, at Rs68,973.28 crore, when compared to the same period last year. This is a markedly significant improvement from our analysis of the previous quarter. Is there a rebound in the economy?
 

Check our previous quarter analysis here.

 

 

We analysed further and found out that the overall net profit margin of the 421 companies has indeed expanded. During December 2011, net profit margin was 8.51%. Now, for the December 2012 quarter, it is 11.54%, or 303 basis percentage points (bps) up. This is not a small difference. But if we look at each individual company’s margins, the story is almost different. We saw that only 50% of the 421 companies reportedly saw their margins expand. This means, the results have been mixed, at best and much of the profits were contributed by big cap companies.

 

Similarly, we analysed net sales of each of the companies and found out that nearly every three out of four companies reported increase in net sales for the December 2012 quarter over the same quarter last year. However, fewer companies—only 62% of the 421 companies— saw their operating profit and net profit increase, respectively.

 

If the above numbers are anything to go by, it would look like optimism is prevailing among companies. There is a lot of chatter amongst the financial community that a rebound could be near and that the market has bottomed out. While we do not rule that out, consider the following: Some of our readers have been getting cold calls from Taj Group to enroll in their membership. Could this be a warning sign of the things to come? Also, consider the recent Credit Suisse report (http://www.moneylife.in/article/decline-in-consumer-optimism-likely-to-continue-credit-suisse/31081.html) on consumer confidence, in which the prognosis isn’t positive. A lot of consumers are actually pessimistic about India’s economic future.

 

Will the remaining results show equal promise as the first 421 companies? Only time will tell, in the meantime—stay tuned.

 

Check our past quarterly analysis reports below:

 

You can check out our similar analysis we’d done on previous quarters below:

Q1FY13 http://www.moneylife.in/article/corporate-india-takes-a-huge-hit-in-the-june-quarter-net-profits-decline-by-almost-half/27714.html
 

Q4FY12 http://www.moneylife.in/article/top-895-companies-increase-net-sales-operating-profits-and-net-profits-despite-margin-pressures/26053.html
 

Q3FY12 http://www.moneylife.in/article/robust-sales-and-poor-earnings-in-december-quarter/23982.html

User

COMMENTS

Suiketu Shah

4 years ago

Very interesting observations.Main point is how wl the Indian govt get back retail clients interest and investments back in equity markets.The local industries are in doldrums and it is mainly the FII money pouring in which is keeping the sensex high as of now(also it seems the kind of inflow which could go away just as quickly as it has come).This is not yet the right time to get into equities for long term investors.Seems much more like a traders market just yet.

CA dev kant

4 years ago

to take benfit from equities, Mutual fund route is best.
in case of direct stock market investors , wide fluctuation of 2 to 5 % intraday and in case of large cap mutual fund 0.25 to 0.50% as compared to prewious day will be there. the invetor if able to to ignore uch fluctuation , he is sure shot sittting on big futurer gains on long term basis.

Nilesh KAMERKAR

4 years ago

Stock prices may have started to move up in anticipation of an impending turnaround.

If turnaround doesn't happen now, it may just be a few quarters away. But it is certain that this gloom too shall pass.

And if we get benign inflation leading to fall in interest rates - We could well be at the beginning of a new bull market.

There is little risk to buy equities at current valuation coupled with the future prospects that look promising (than that of the recent past). Also equities as an asset class are undervalued. Certainly we are nowhere near levels which can be referred to as overvalued or euphoric.

Not investing in Equity now with a 3 -5 years kind of a time frame could be a BIGGER mistake.

It is time to be bullish on India. This could well be the time to sow the seeds for lasting wealth creation.

EPFO says Aadhaar not mandatory for members

After discovering that the UIDAI is organising enrolment camps only in 18 states, the provident fund body decided to withdraw its decision to make Aadhaar number mandatory for all EPFO members

The Employees' Provident Fund Organisation (EPFO) has said that looking at the difficulties in enrolment, it has decided not to make the UID (Unique Identification) or Aadhaar number mandatory for its over five crore members. The provident fund body said it would now collect core banking account number of all contributing members as indicated in electronic challan cum return (ECR).

 

Trade unions (TUs) had also raised the red flag against the retirement fund body’s suo moto decision to make submission of Aadhaar mandatory citing difficulties in obtaining Aadhaar.

 

In a release, the EPFO said, “In view of the discussion held with officials of the Unique Identification Authority of India (UIDAI), and the time required in the process of obtaining Aadhaar numbers, it may not be possible to obtain Aadhaar number or enrolment number by EPF members by 1 March 2013. Therefore it has been decided not to make Aadhaar number or enrolment number mandatory for EPF members from 1 March 2013.”

 

During the discussion, the EPFO found that UIDAI through its registrars has been organising enrolment camps in 18 states only. “Registrar General of India (RGI) has been collecting data in respect of the remaining states through National Population Register (NPR). While data collected by RGI is also being processed for issue of Aadhaar numbers by UIDAI, the methodology used by RGI for setting up enrolment camps is different i.e. it is being done on the basis of house-to-house data collected by enumerators during Census Operations 2011, unlike UIDAI camps, where any resident, irrespective of the place of residence can get himself enrolled for Aadhaar number. Thus enrolment may take considerable time,” the EPFO said.

 

It also asked its regional and sub-regional offices to make an all-out effort to collect the core banking account number of all contributing members as indicated in the ECR. “The updation of members’ master in the database is one of the standards required for implementation of the ISO 9001 certification and the success indicator under the Results Framework Document (RFD). In view of the benefits that would accrue both to the EPF members and EPFO, it has now been decided to collect the core banking account number of all contributing members as indicated in the ECR,” the pension fund body said.

 

Last month, EPFO had said that new members joining the its retirement fund scheme will have to mandatorily furnish Aadhaar number as know your customer (KYC) credential for enrolment from 1 March 2013. The move was opposed by TUs.

 

Questioning the decision of the EPFO, trade union leaders had said that it would be impossible for the members to provide Aadhaar numbers as the scheme was not operational in many parts of the country. Also it was cumbersome to get the numbers in states where the scheme is operational.

 

EPFO is working towards creating a central database where all members would have a unique account number and would not require to transfer PF accounts to another one in the event of changing jobs.

 

EPFO recently digitalised its database of regional offices and launched its e-passbook service where subscribers can access their account online. Now the body is working towards integrating this digital database and bring it together at one place.

User

COMMENTS

M G WARRIER

4 years ago

Till such time UIDAI is able to issue AADHAAR Cards/Numbers(Centre is yet to decide whether AADHAAR will remain a 'number' and NPR Cards will be the 'mandatory' identification, according to reports)to all who have applied up to, say, a month back and are in a position to accept 'spot' applications from new applicants, it would be expedient to use AADHAAR as one of the alternative records for identification.

CA dev kant

4 years ago

higher intert rate by 0.25% may be offered if epf holder gives aadhar number voluntarily to provide better services.

REPLY

M G WARRIER

In Reply to CA dev kant 4 years ago

Good idea. Also, pay incremental additional interest @ one per cent per annum for amounts kept with organisations(including banks) as 'unclaimed' deposits when claimant is traced out and the amount is paid. e.g. Rs1000 'accounted' as unclaimed deposit as on March 31,2013 which earnt interest @10 per cent per annum as on that date will grow to Rs1244(1000+110+134) if paid on April1, 2015.

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