Do it yourself

If social media posts are any guide to the popular sentiments, then definitely the Indian equity markets have frustrated even most seasoned investors. In particular, the young investors and traders who had their first tryst with the equity investing/trading are sounding completely disillusioned. The seasoned investors who have experience of negotiating bear markets multiple times, are mostly frustrated due to the lack of adequate policy support and regulatory overbearance. In my view, insofar as the policy support (or lack of it) is concerned, it is mostly due to misplaced expectations and persistence denial of actual execution. The issue of regulatory overbearance is however a matter of debate. However, the new class of investors is disillusioned for multiple reasons. First, many of them had committed to investing/trading as their preferred full-time occupation. After this severe market correction, their capital has materially depleted and their confidence is badly shaken. The worst p...

The current market condition reminds me of one of my favorite bedtime stories. I love to narrate this time and again. Once upon a time a sparrow couple made their nest in a wheat farm. In a few days, the lady sparrow laid four eggs. In two weeks, eggs were fully hatched and four chicks were born. In the meantime, the wheat stems had started growing tall. In another two weeks, the chicks started to fledge and the wheat kernels began to turn golden. This was the day when parent sparrows first discussed leaving their nest and moving somewhere else. “The crop will soon be ready for the harvest. Our nest shall be exposed and trampled by the harvesters”, the lady sparrow feared. Her companion however was not worried as yet. “Nothing to worry as yet”, he assured her. In another three weeks, the farm turned completely golden with wheat completely ripe to harvest. The lady sparrow was terribly worried now. “We must fly out now. The chicks have also grown up now and can easily fly to the w...

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% ...

The last earnings season for FY20 has started. The three IT majors have announced results which appear good under the given circumstances. HDFC Bank also announced an encouraging set of numbers. The brokerages have drastically cut estimates for FY21 and FY22 earnings apparently to factor in the business disruption caused by the lockdown. Though there is still large variance in the estimates, the consensus appears to be favoring a flat earnings growth in FY21 and single digit growth in FY21. After reviewing earnings estimates of numerous brokerages, I have realized that respective analysts might have just used this opportunity to climb down from their egregious estimates, which have proven consistently wrong for past 5 years at least. Their basic premise still appear erroneous to me, though the data now appears much closer to the reality. I would like to highlight just three points in this context: 1.     The average earnings growth of Indian c...