As an asset class equity continued to outperform in the previous week, US equities are trading in uncharted territory and constantly making all-time highs.
Back home, Nifty was up 0.32% on week-on-week basis. Top gainers no the sector front were pharmaceuticals (+1.78%), IT (+1.34%), financials (+1.72%) and energy (+1.59%) while PSU banks (-4.06%), realty (-3.47%), auto (-3.04%) and infra (-0.92%) saw profit taking. FII (Foreign institutional investors) were not buyers in cash and index futures for the week, giving it much required sentimental relief to bullish traders. From past 2 weeks, markets are consolidating around current levels as Q3FY17 earnings update roll out.
Important highlights of 3QFY17 earnings update, so far, have been margin improvement. It’s been the 11th consecutive quarter of margin improvement. Oil and gas, private banks, NBFCs and metals led the sales growth. Auto and telecom reported sales decline. PSU banks, oil and gas, metals and capital goods led PAT capital growth. EBITDA growth was led by metals, capital goods, PSU banks and oil & gas. Private banks, telecom and autos reported PAT decline. PAT growth was driven entirely by Cyclicals, driven by a sharp recovery in domestic cyclicals and modest recovery in global cyclicals. But, the defensive sectors showed weakest growth in 5 years, with revenues growing only 6%.
Nifty sales, EBITDA and PAT grew 4.9%, 9.6% and 10.3%. In in 3QFY17, revenue growth was at nine-quarter high, translating into 10-quarter high PAT growth. 63% of Nifty universe posted in-line or higher-than-estimated PAT; 82% posted in-line or higher-than-estimated EBITDA. Nifty EBITDA margin was one of the highest in last six years, with the 16th consecutive quarter of YoY expansion.
On sectors front, ‘consumer’ delivered first quarter of no growth in net profit in over a decade reeling under the influence of demonetization. Profit growth for cement/auto moderated as cost inflation increased. However, recent flows show volume off-take picking up. Metals showed first quarter of net profit growth after 2 years of decline. Telecom weighed by Reliance-Jio impact, saw huge fall in proditability. Healthcare/technology observed continuance of moderate PAT growth.
Important highlight of Q3FY17 has been signs of asset quality concern for PSU banks bottoming out. Markets are expected to trade firm where corrections are expected to be brought into. Now liquidity is expected to drive the markets.