Among the factors contributing to the market capitulation is the continued earnings drought in India Inc. The aggregate picture of 397 companies in the CNX 500 index which have declared their December quarter results so far doesn’t paint a pretty picture. Sales are down 0.6 per cent year-on-year while profits have fallen 6 per cent.

Widespread decline

The worst performers include banks, miners, crude oil explorers and steel — earnings of these sectors have fallen between 50 per cent and over 400 per cent. Banks have been weighed down by asset quality concerns and increased provisioning on stressed loans. Public sector banks, in particular, have taken a hard knock.

Punjab National Bank, for instance, saw its December quarter profit dip more than 90 per cent y-o-y while the loss of IOB nearly tripled.

The commodity rout has given much pain to miners such as MOIL (formerly Manganese Ore India) and Vedanta which have seen their December quarter profit shrink by up to 99 per cent. Similar has been the case with oil explorer Cairn India which has borne the brunt of falling crude oil price and high cess on the fuel.

A few exceptions

Steel makers, such as JSW Steel, SAIL and Tata Steel posted huge losses in the quarter due to a perfect storm of weak demand and crashing prices, a consequence of cheap Chinese steel flooding the market.

The few sectors that did well in the December quarter include autos, refineries and paints which saw profit grow 25-40 per cent. Aided by growing sales of passenger cars, Maruti Suzuki’s profit grew 27 per cent, while improving commercial vehicle sales saw Ashok Leyland’s profit zoom six-fold.

Strong refining margins helped Reliance Industries grow profit nearly 40 per cent in the December quarter. Paint makers such as Asian Paints and Kansai Nerolac benefited from cheap raw material cost due to the fall in crude oil prices. Thus, profit grew 25 to 29 per cent. But this was not good enough to dim the gloom in earnings.

Of the 397 companies, 150 saw contraction in profits in the December quarter, and 41 posted earnings growth of less than 10 per cent y-o-y. Ergo: more than half the companies faced rough weather.

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