Weak Sentiment

Slowdown, global conditions pull down volume growth.

The dust on political uncertainty has settled as Prime Minister Narendra Modi is set for a second term. However, the elections, coupled with slowing consumption trends in rural markets, are bothering consumption-oriented sectors, weighing heavily on fourth quarter results.

The last quarter of financial year 2018/19 is turning out to be a damp squib with close to 500 BSE comapnies registering a three-quarter low top-line growth amid poor demand, tough global macro environment and liquidity crunch. In the fourth quarter of FY19, the year-on-year (y-o-y) net sales growth for the sample of 488 BSE-listed companies was 10 per cent, the slowest in the last three quarters.

Excluding BFSI firms, the volume growth comes to just 7.6 per cent. Marred with slow revenue growth, bottom-line numbers were a disappointment, too. Operating profits of the ex-BFSI sample grew 3.5 per cent, again the slowest over the past three quarters. However, profit after tax grew 5.4 per cent compared to 1.3 per cent and -2.9 per cent growth (y-o-y) in the previous two quarters.

The sectoral show was a mix bag with a majority of them going with the tide of de-accelerated volume growth. The worst hit were diamond and jewellery, infrastructure, retailing and healthcare sectors as their revenue growth slid over eight percentage points in the last two quarters. By the end of this month, most companies will come out with their fourth quarter results, affirming our stance of a weaker-than-expected earnings season.