Nifty Q3 earnings review

Last updated: 04 Mar, 2021 | 11:26 am

Nifty Q3 earnings review

(i) Most of the companies in the Nifty 50 index have reported better-than-estimated results in Oct-Dec 20 period, signalling that Nifty companies have left pandemic blues behind.

(ii) Of the 50 Nifty companies, 33 beat earnings estimates. Metals and Pharma stocks in Nifty 50 recorded the highest rise in the net profit.

(iii) The average EBITDA margins of 39 companies—excluding banking, financial and insurance companies—improved to 25.02% in the reported quarter from 21.94% a year ago.

(iv) The table below shows earnings of various sectors, and their share in Nifty's bottomline.

How did the index behave in Feb-21?

Analysis

  • Swifter than expected economic recovery, mass-vaccination drives  upbeat corporate earnings have lent support to the rally in the Indian stock market.
  • However,  interest rate volatility has impacted investor sentiment. The BEER ratio in India has crossed 1.4, indicating that bonds are relatively more attractive as compared to equities. 
  • Empirically when yields have gone up, stock markets trend downwards as future cash flows get discounted at a higher rate, making equities look unattractive.
  • Surge in cases in specific parts of India has brought in a fear of second round of lockdowns.
  • In this environment, we advise a up-in-quality approach across both stocks and bonds, along with a focus on valuations and fundamentals.

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