Of Corporate Earnings, Updates on Global Financial Markets and Top Stocks in Action Today

Mon, 7 May Pre-Open

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Share markets in India closed the week on a negative note on Friday. At the closing bell, the BSE Sensex stood lower by 188 points (down 0.5%) and the NSE Nifty closed down by 61 points (down 0.6%). The BSE Mid Cap index was down 0.4%, while the BSE Small Cap index was down by 0.3%.

Corporate Results in March 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.

As reported in the BSE website, 49% of the companies that reported its quarterly results recorded an improvement in their financial performance as compared to last year. While, 20% of the companies reported a deterioration in performance as compared to last year. And for the balance 31% of the companies, the results were flattish.

Having said that, 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.

Update on Global Financial Markets

In the news from global financial markets during last week, the US Federal Reserve left interest rates unchanged at 1.50-1.75% in its recently held monetary policy meet. The central bank also signalled that the gradual path of rate hikes will stay.

Note that Fed officials have indicated that they expect a total of 3 to 4 hikes in 2018. This view was reaffirmed as the central bank said that economic conditions will warrant further gradual increases in the federal funds rate.

Note that with the US economy chugging along for many months, the Fed is now gradually easing off the stimulus it provides to the economy by raising interest rates to more normal levels.

How does a US interest rate hike affect Indian investors?

The instant effect is foreign money moving out of India's vaults. This means a slight correction in the share market in India, albeit temporarily.

While this might provide a good buying opportunity in long-term stocks, the main thing to look forward would be capex and earnings trends.

In the end, Indian investors are better off staying informed about the corporate earnings revival than Fed rate hikes

Top Stocks in Action Today

The stock of ICICI Bank to be in the radar today as the company reports its results for the quarter ended March 2018. As per an article in leading financial daily, the board may take up the Chanda Kochhar husband's loan issue in today's board meeting.

Other stocks such as Shalby Ltd, Tata Chemicals, Tata Coffee, Pfizer, Trident Ltd, Exide Industries, Talwalkars Better Value Fitness Ltd are also expected to be in the news as they declare their results for the quarter ended March 2018.

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