Nifty Q3 Results: The Three Sectors That Proved To Be A Drag

Metals, industrials and oil marketing companies performed the worst in the third quarter of the ongoing fiscal even as more than two-thirds of Nifty 50 companies either met or beat estimates for operating income.

Sectors such as agrochemicals, fast-moving consumer goods, retail, information technology and pharmaceuticals beat estimates, according to BloombergQuint’s data of 49 of the index’s 50 constituents that reported their October-December numbers by Feb.14. Yes Bank Ltd. put off its third-quarter earnings till March 14 as the beleaguered private lender is evaluating interest from investors to raise funds.

Corporate earnings remained weak in the quarter ended December even as downgrades moderated, Dhirendra Tiwari, head of research at Antique Stock Broking, said. He expects earnings to recover from the second half of the next fiscal due to corporate tax cuts, strong rabi season, easy monetary policy and the central bank’s measures to improve credit flow.

Here’s how the individual sectors performed in the quarter ended December.

Agriculture

• UPL gaining share in key markets despite difficult external environment.
• Management maintained revenue and Ebitda growth guidance.

Automobile

• Auto companies’ numbers fail to impress street.
• Bajaj Auto Ltd. gains on strong exports.
• Hero MotoCorp Ltd. results driven by cost savings and corporate tax cut.
• Negative operating leverage and higher depreciation weigh on Eicher Motors Ltd.
• Maruti Suzuki India Ltd. impacted due to higher sales promotion expense.
• Tata Motors Ltd. disappoints both on India business as well as JLR.
• One-off cost and exceptional loss impact profits for Mahindra & Mahindra Ltd.

Cement

• UltraTech Cement Ltd. reports in line results.
• Strong commentary and volumes aid stock performance.

Infrastructure

• Larsen & Toubro Ltd. misses estimates but maintains guidance.
• Order book growth at cost of lower revenues.

Consumer Goods

• All FMCG companies report financials that meet estimates.
• Volume growth strong for Hindustan Unilever Ltd., ITC Ltd. and Asian Paints Ltd.
• Management spoke of weak economy and rural demand.

Oil and gas

• Reliance Industries Ltd. numbers below estimates due to weaker petrochemical and Jio performance.
• Better-than-expected petchem and transmission income aid GAIL (India) Ltd.’s performance.
• Refining segment was the strongest for Bharat Petroleum Corp. Ltd. due to higher capacity utilisation.
• Hindustan Petroleum Corporation Ltd. and Indian Oil Corporation Ltd. suffered losses due to low gross margins and refinery shutdowns.

Financial Services

• Non-bank lenders outperform core banks in the third quarter.
• Weak asset quality and higher slippages impacted financials of banks.
• Majority of banks reported weak loan growth.

Information Technology

• IT companies report better margins but commentary optimistic.
• Revenue deceleration in banking-financial services and North America overshadows margin performance for Tata Consultancy Ltd.
• Large deal wins, double-digit growth in U.S. and Europe, EBIT margin improved key positives for Infosys Ltd.
• HCL Technologies Ltd. increases lower end of FY20 revenue growth guidance and operating margins.
• Costs increases saw pressure on consolidated operating margins for Wipro Ltd.

Media

• Weak ad revenues and higher costs dent financials of Zee Entertainment Enterprises Ltd.

Metals

• Sharply lower steel pricing and realisations dragged margins.
• Overseas subsidiaries dent JSW Steel Ltd.
• Europe disappoints again, India business in line for Tata Steel Ltd.
• Ramp-up in key businesses disappointing for Vedanta ltd.; margins aided by lower input costs.

Pharma

• Gross margin improvement was a big surprise driven by both generics and Pharmaceuticals Services and Active Ingredients for Dr. Reddy’s Laboratories Ltd.
• Strong India and U.S. business for Cipla Ltd. and Sun Pharmaceutical Industries Ltd.

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Telecom

• Numbers aided by higher exit charges and higher energy spread for Bharti Infratel Ltd.
• Africa business, home broadband and enterprise business aided Bharti Airtel Ltd.; average revenue per user strong.