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Of Analysis of Corporate Earnings, SIPs Showing Weak Trends and Top Stocks in Action Today
Fri, 18 May Pre-Open | Parth Parekh, TM Team

After rocket gains of 58% in calendar year 2017, BSE Smallcap Index is down 9% since the beginning of 2018. While corporate earnings remained depressed on account of disruptions by demonetization and goods and service tax, the sharp rally in 2017 was driven purely by expansion in the price/earnings (PE) multiples.

Rallies driven by PE expansion are not sustainable. Serious long-term investors should instead focus on a recovery in the corporate earnings. As 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 too 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 giving mixed signals for the road ahead.

Performance of Different Sectors in the Quarter Ended March 2018
Sectors Performing WellSectors Showing Stress
AutomobilesCapital Goods
LubricantsPharmaceutical
FMCGCement
MetalPower
Source: Company data, BSE

After two years of depressed earnings, hopes of a trend reversal are high. However, one more quarter of depressed earnings could lead to a deep correction in the indices.

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Systematic Investments Plans (SIPs) Take a Hit in the month of April

Volatility in the stock markets, have led to retail investors going slow on their SIPs in the month of April. The SIP flow which peaked at Rs 7,119 crore in March 2018 have now slowed to Rs 6,690 in April 2018. This fall of Rs 420 crore is the highest as witnessed in two years.

Now many of these retail participants are first time investors who have not witnessed the markets fall in a bear market. In case of a hefty correction in the stock market, these first time investors could possibly exit their investments in panic, which could aggravate the market correction.

Top Stocks in Action Today

The stock of Bajaj Finance, Balkrishna Industries are expected to react in today's trade as they declared their quarterly results yesterday after market hours.

Further, stocks such as Amara Raja Batteries, Ashok Leyland, Inox Wind, Kitex, Poddar Housing, Thermax are expected to be in action today as they declare their results for the quarter ended March 2018.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

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Stock Market Updates

MPHASIS LTD Plunges by 5%; BSE IT Index Down 2.8% (Today's Market)

Oct 19, 2018 02:56 PM

MPHASIS LTD share price has plunged by 5% and its current market price is Rs 1,120. The BSE IT is down by 2.8%. The top gainers in the BSE IT Index are NIIT TECHNOLOGIES (up 5.1%) and NIIT LTD (up 1.4%). The top losers are MPHASIS LTD (down 5.2%) and L&T INFOTECH LTD (down 5.3%).

MAGMA FINCORP Plunges by 5%; BSE 500 Index Down 1.5% (Today's Market)

Oct 19, 2018 02:56 PM

MAGMA FINCORP share price has plunged by 5% and its current market price is Rs 103. The BSE 500 is down by 1.5%. The top gainers in the BSE 500 Index are LAKSHMI VILAS BANK (up 7.7%) and JET AIRWAYS (up 5.9%). The top losers are MAGMA FINCORP (down 5.1%) and PIRAMAL ENTERPRISES (down 9.7%).

TV TODAY NETWORK Plunges by 5%; BSE 500 Index Down 1.5% (Today's Market)

Oct 19, 2018 02:52 PM

TV TODAY NETWORK share price has plunged by 5% and its current market price is Rs 395. The BSE 500 is down by 1.5%. The top gainers in the BSE 500 Index are LAKSHMI VILAS BANK (up 7.2%) and JET AIRWAYS (up 6.4%). The top losers are TV TODAY NETWORK (down 5.1%) and L&T INFOTECH LTD (down 5.5%).

MUTHOOT FINANCE Plunges by 5%; BSE 500 Index Down 1.4% (Today's Market)

Oct 19, 2018 02:48 PM

MUTHOOT FINANCE share price has plunged by 5% and its current market price is Rs 404. The BSE 500 is down by 1.4%. The top gainers in the BSE 500 Index are LAKSHMI VILAS BANK (up 7.3%) and JET AIRWAYS (up 6.5%). The top losers are MUTHOOT FINANCE (down 5.2%) and PIRAMAL ENTERPRISES (down 9.8%).

HEIDELBERG CEMENT Plunges by 5%; BSE 500 Index Down 1.3% (Today's Market)

Oct 19, 2018 02:38 PM

HEIDELBERG CEMENT share price has plunged by 5% and its current market price is Rs 144. The BSE 500 is down by 1.3%. The top gainers in the BSE 500 Index are LAKSHMI VILAS BANK (up 7.4%) and RELIANCE INFRA (up 6.7%). The top losers are HEIDELBERG CEMENT (down 5.3%) and PIRAMAL ENTERPRISES (down 9.3%).

Sensex Down 420 Points; IT Stocks Tank (Today's Market)

Oct 19, 2018 12:30 pm

The BSE Sensex is trading down by 420 points, while the NSE Nifty is trading down by 140 points.

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