India Inc Q1 earnings a mixed bag; outlook stays cautious

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Nifty companies also showed impressive earnings growth. “Nifty earnings growth has been strong, led by sustained revenue growth and operating margin expansion driving 25% net profit growth for Q1," said Sushant Bhansali, CEO, Ambit Asset Management. In addition to better operating performance, other incomes rose as well.

Improved operating profits and higher other incomes were able to mitigate the impact of an increase interest costs. Earnings were modestly ahead of expectations, said analysts at Kotak Institutional Equities. They, however, added that the bulk of the outperformance was due to a large beat in the case of only one company (JSW Steel) and higher-than-assumed other income in several cases.

“The market had euphoric expectations for Q1, and the actual results are marginally below; however, the overall performance is robust enough on the earnings growth front," said Vinod Nair, head of research at Geojit Financial Services. Consumer demand was robust in auto and financial sectors with the auto sector benefiting from moderation in metal prices. According to analysts, state-run banks and small banks showed impressive category-specific results.

Earnings momentum was also supported by hotels and a few others. However, IT, cement, chemicals and metals saw challenges and year-on-year performance was impacted by lower realizations, cost challenges and global demand constraints. The pharma sector showed some spark, thanks to some respite on US pricing concerns.

Overall performance was mixed, with banks having done well and pharma also seeing a good uptick, said A.K. Prabhakar, head of research at IDBI Capital. Banking sector earnings, however, may have peaked as seen in their stock performances, while any correction in