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:
Q3FY12 http://www.moneylife.in/article/robust-sales-and-poor-earnings-in-december-quarter/23982.html
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This means access to other articles (outside the subscription period) are not included.
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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.
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.