Do it yourself

The latest earnings season (1QFY25) is almost over. the ~4% yoy growth in NSE500 profit after tax (PAT) has marginally exceeded the modest expectations of a 3% yoy growth. NSE500 revenue grew ~6% yoy. This is the slowest pace of growth since the covid affected 1QFY21. The refiners and oil marketing companies materially dragged the overall performance. Sequentially, the earnings growth slipped sharply from 4QFY24. Negative surprises outweigh, smallcap earnings failed the optimism As per the brokerage Emkay’s report, “the ratio of negative surprises jumped sharply, from 46% to 62% for Emkay coverage and 56% to 66% for the Nifty.” The brokerage however added that “The aggregate numbers were skewed owing to the Energy sector’s 30% YoY PAT drop on a high base. EBITDA margins fell by 20bps YoY to 15.1%, mostly due to a 388bp contraction for the Energy sector – most other sectors delivered strong margins.” Post the earnings, the consensus Nifty50 EPS witnessed a cut of 1.7% FY25 and 1% ...

I had an opportunity to meet a group of market participants and industry representatives at a corporate event this week. The discussions over lunch and tea revolved around the three broader topics – (a) State of equity markets; (b) Expectations for the final Union Budget for FY25; and (c) Corporate performance. Unsurprisingly no one was interested in discussing politics, geopolitics and the US Fed’s policy. Equity markets Most people were satisfied with the performance of markets in general and their personal portfolios in particular. Almost everyone believed that the stock prices will continue to rise for the next couple of years at least; though there could be some intermittent corrections. Everyone appeared prepared to invest more money in stocks. The return expectations from equity investments were in high teens on the lower side. With a few exceptions, most people appeared market cap agnostic in their investment strategy. In fact, the awareness about SME segment stocks surpr...