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Growth in net sales of India Inc slowed down in the September 2016 quarter (Q2) according to data provided by Capitaline on 37 Nifty 50 companies (excluding financial services and oil & gas companies) and 365 CNX 500 companies.
Margins improveSales of companies in the CNX 500 index grew 6.8 per cent year-on-year compared to 11.7 per cent in the June 2016 quarter. However, pay Commission hikes and good monsoon helped in demand ahead of the festive season and aided the consumption sector.
Margins improved with growth in operating profit and net profit at 14 per cent and 13 per cent, respectively, due to stable operating and interest costs. Profit growth was also better compared to 4-7 per cent growth reported by the companies in the previous quarter.
Daljeet Singh Kohli, Head of Research at IndiaNivesh Securities pointed out that performance has been in line with expectations and there was nothing surprising positively or negatively.
“Overall financial performance in the September 2016 quarter has been 4-5 per cent higher than expectations but there is no meaning (for it) after demonetisation,” pointed out Sandip Sabharwal, an independent analyst.
Large companies performed better than smaller ones. Sales of Nifty 50 companies (excluding financial services and oil & gas companies) grew 8.8 per cent y-o-y in Q2. The same applied to profit growth as well.
Operating profit and net profit of Nifty 50 companies grew 23 per cent and 16 per cent, respectively. This has been largely due to a rebound seen by commodity-led companies such as Hindalco Industries, Tata Steel and JSW Steel unlike a decline seen y-o-y in FY16 as well as the June 2016 quarter.
Demonetisation to weighPerformance in the December 2016 quarter is expected to be hit badly due to demonetisation, rupee depreciation and rise in crude oil prices. Sectors related to consumption such as fast-moving consumer goods, consumer durables, automobiles and real estate are likely to be hit the most. However, the negatives have already been mostly factored into by the market with the benchmark indices down 5 per cent in November.
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