The recently concluded earnings' quarter had a bearing on capital markets. One cannot ignore the multiple factors which determine the movement of the stock market, especially last year, when the markets went through a lot of shock waves, from Brexit vote results to Donald Trump victory to government demonetisation move.
But given the exceptional nature of the events, prediction of earnings for Q3FY17 makes it more challenging. Experts believe that the sentiments related earnings or any such periodic events already get factored into the markets before they are announced.
The results have started trickling in and analysts are of a view that the earnings performance for December quarter would be significantly impacted by demonetisation.
The Sensex seemed to have grapple with this fear factor, and plunged around 6 per cent during the period between Oct-Dec 2016, however, things should not be looked into isolation.
This was the second highest fall registered by the market barometer over the past 21 quarters, the steepest being (-) 6.7 per cent during the period July-September 2015.
Interestingly, the fall during the Oct-Dec 2016 was the steepest compared to the period between Oct-Dec in other years over 21 quarters.
Y-o-y change of Sensex for each quarter between 2011-2016; y-o-y change in total income for December 2016 includes only 18 companies; For other years the total income growth was calculated on the a set of over 4,000 companies; figures in per cent.
The trend over the years does not necessarily establish any co-relation between the earnings growth and market movements but see many instances of markets gaining traction with good earnings growth.
Market movement is a function of multiple factors but as bourses are already tackling the subdued earnings sentiments, it is interesting to watch how it reacts to the final outcome.