Of Analysis of Corporate Earnings, Crash in Indigo Stock and Top Stocks in Action Today

Fri, 4 May Pre-Open

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Share markets in India closed on a flat note yesterday. Majority of sectoral indices ended in red, with stocks in the pharmaceutical sector leading the losses.

At the closing bell yesterday, the BSE Sensex stood lower by 73 points (down 0.2%) and the NSE Nifty closed down by 38 points (down 0.4%). The BSE Mid Cap index was down 1.1%, while the BSE Small Cap index was down by 0.8%.

Operating Profits Zooms in December Quarter

Peter Lynch in his famous book 'One Up on Wall Street' quotes:

• "If you can follow only one bit of data, follow the earnings-assuming the company in question has earnings. As you'll see in this text, I subscribe to the crusty notion that sooner or later earnings make or break an investment in equities. What the stock price does today, tomorrow, or next week is only a distraction."

We to believe that in the long-run, share prices tend to move in the direction of the earnings growth. And the recent data on corporate earnings is nothing but a positive signal.

As reported in Economic Times, the revenue growth for 193 companies was 14.5%. The operating profits too grew at a similar pace at 15%. However, there was only a marginal improvement in the growth of net profits. The subdued growth of 0.4% in net profits was mainly because of higher finance cost. Finance cost increased by around 20% as compared to a year ago.

Performance of Different Sectors in March Quarter

Sectors Performing Well	Sectors Showing Stress
Automobiles	Capital Goods
Lubricants	Pharmaceutical
FMCG	Cement
Metal	Power

These are still early days as only a handful of companies have reported their quarterly numbers. After two years of depressed earnings, hopes of a trend reversal are high. One more quarter of depressed earnings could lead to a deep correction in the indices.

Indigo Stock Nosedives

The stock of Interglobe Aviation crashed almost 11% in yesterday's trade. The stock crashed after reporting a subdued set of numbers for the quarter ended March 2018. A rise in the prices of crude oil coupled with intense competition from peers led to the fall in the numbers. To add to this, the strengthening dollar too added to the woes as the company makes its rental payments in US dollars.

All these factors have led to the net profits reducing by 73% during the quarter as compared to a year ago. Further, investors has perceived the exit of its chief executive officer (CEO)-Mr Aditya Ghosh as a negative sign and punished the stock. The stock is down by 20% from its highs of 1,520 it touched before two weeks.

Top Stocks in Action Today

The stock of IndoCount Industries, Godrej Properties, NOCIL, PVR, GE Shipping, Deepak Nitrite, Philips Carbon, Astron Paper & Board Mill Ltd are expected to be in action today as they declare their results for the quarter ended March 2018.

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Indian Share Market Update: Top Gainers and Losers