Will Europe come out of the crisis and will the Chinese economy face the prospect of a hard landing seem to be the burning questions at the top of global investors’ minds and it’s no different in the Indian markets. Though it’s but natural for investors to track these significant global developments, the issues seem to be acquiring the maximum number of eyeballs and are stealing the thunder out of India Inc’s important fourth quarter results’ season. The benchmark index is down by 5 per cent since the beginning of the new fiscal and the markets have gone jittery, thereby turning the mood a bit somber. This is despite the fact that the numbers that we have with us have shown a good upbeat performance by India Inc in Q4FY10. But there are a couple of points here that should be noted. The first is that though the market does beam out a knee-jerk reaction to global events initially, it has a tendency to recover from the lows, which indicates that with better numbers coming in, the market does give its due and catches up with the valuations. Secondly, there is a marked improvement in the economic scenario in Q4FY10 as compared to Q4FY09 and with this scenario only expected to improve further the earnings’ expectation will only go up from here. Hence, the Q4FY10 results do attain more significance from a market point of view.
Of the 1,513 results that we have with us so far, for Q4FY10, India Inc’s topline grew by 26.13 per cent, while the bottomline grew by 30.07 per cent during the same period. The highlight of this quarter results is not the bottomline but the topline growth that India Inc has posted. This is by far the best topline growth India Inc has seen in the last four quarters and indicates the returning of the pricing power for the companies apart from the volumes they have been generating consistently. Though there has been a consensus about the better Q4FY10 results, we at DSIJ believe that it has exceeded market expectations by quite a mile. In fact, if we adjust for the aberrations (refinery numbers and the extraordinary items), India Inc’s revenues grew by 25.49 per cent, while profits have done even better at 33.10 per cent. The story is the same on a sequential basis where after adjusting for aberrations, India Inc’s revenues grow by almost 10 per cent and profits by 6.39 per cent. This clearly indicates that the growth has not come due to the base effect but more from the return of consumption demand across the industries.
Moreover, this growth is also broad-based and well-spread across the Sensex, Group A ex-Sensex companies and the rest of India Inc. Besides, with more than 60 per cent of the companies showing growth in both topline and bottomline, it only underscores the fact that India Inc is back on track and the growth pattern looks sustainable. The other fact one should also keep in mind is that the manufacturing sector with topline and bottomline growth of 39 per cent and 70 per cent respectively has led from the front and clearly outshone the services sector which has been experiencing a very subdued quarter this time.
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