"That which does not
kill us makes us stronger."
—Friedrich Nietzsche
(German, 1844-1900)
Word for the day
Ruth (n)
Pity or compassion
Malice towards none
Dhirendra Brahmachari
Chandraswami
....
....
Asaram
Gurmeet Ram Rahim!
First random thought this morning
In past seven decades there
have been numerous cases of impropriety, criminality and immorality by the
people in religious robes enjoying immense trust of people, common and elite.
Why then is it so that each
such instance is managed separately and not as a trend?
Handling this malaise as a
trend, would mean taking preventive steps including regular surveillance over
security and financial compliance matters.
...and the macro data
As per the Morgan Stanley's
recent note in the quarter for the broad market (2629 companies) the net profit
fell 11% YoY and EBITDA margins contracted 194bp YoY. The aggregate revenue
grew by 9% YoY, mostly led by the commodity linked sectors (energy, materials
and utilities) and industrials. For Sensex companies revenue and net profit
growth of 5% YoY and -6% YoY, respectively. EBITDA margin contracted by 177bp
YoY.
As per the report margin
compression was conspicuous across sectors with healthcare and consumer discretionary
leading the charge. The 11% fall in profit was led by telecoms and consumer
discretionary.
The report finds that
Financials, Utilities, Technology and Telecoms sector companies did not report
impact of GST on their earnings either in their earnings release or the
management commentary. Companies in the materials, consumer discretionary and
consumer staple sectors reported impact due to channel destocking and dealer
incentivization.
As per the consensus
estimates, presently the market seems to be expecting 11% profit growth for the
full year FY18 (Sensex FY18 EPS of Rs1600 vs 1448 in FY17) and a CAGR of 15%
over FY17-FY19 (Sensex FY19 EPS of rs1928 vs. 1448 of FY17).
The data available so far
for 2QFY18 is not encouraging either. Which means, the earnings estimates may
see further downgrades.
For example, as per the
latest Economic Indicator Update of Goldman Sachs, the preliminary July reading
of their India Current Activity Indicator (CAI) suggests that growth moderated
further to 6.8% qoq ann. from 8.5% in June, suggesting a deceleration in
activity (GS India CAI is calculated on a 3month/3month annualized basis).
As per the update, most of
the indicators such as two-wheeler sales, car sales, power demand,
manufacturing and services PMIs and commercial vehicle sales witnessed slower
growth in the three months to July compared to June.
Rural economy indicators
like agriculture loans, tractor sales and agriculture exports remained
laggards. GS's separate urban and rural economy CAIs indicate that the urban
economy grew by 7.5% qoq ann. from 8.3% in June, while rural economic growth
fell sharply to 5.1% qoq ann. vs. 9.5% in June. Excluding strong two-wheeler
sales most other rural indicators continue to register tepid growth of 4%-5%.
Credit growth continues to
remain weak led by subdued credit demand conditions.
The slowdown in economic
activity has come on the back of inflation and INR/USD bottoming, and
tightening of monetary policy easing corridor.
The markets have overlooked
tepid earnings growth due to stronger macro outlook. The point is whether
markets are prepared for a macro shock!
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