Q2FY24: More Winners Than Losers In A Sparkling Scenario

One of the most highly anticipated periods of the year is the time when companies declare their Quarterly Results. We are in the midst of September-ending quarterly results that hold significant importance for investors as they come just before the ‘festival of lights’ season and the start of a fresh year. Before delving into the details of the Q2FY24 for most of the companies’ results, let’s take a brief overview of the current market scenario 

Amidst the recent fluctuations in global markets, it’s intriguing to see how various factors are shaping the financial landscape. The focus has shifted from external influences to internal catalysts that promise to come under the spotlight in the coming days. The earnings’ season is upon us, a crucial time when companies reveal their financial performance, and the Reserve Bank of India (RBI) is preparing for pivotal decisions. Additionally, India’s triumph at the Asian Games and the anticipation of the cricket extravaganza add an extra layer of excitement. 

Recently, due to the US Treasury yields and crude oil prices, there’s been a noteworthy correction that has breathed life into the equity market. Importantly, the banking and financial sector is delivering positive news with strong credit growth and improving asset quality. Geopolitically, an escalation of violence in the Israel-occupied Gaza Strip has cast a shadow over the region. However, the financial markets have displayed resilience, bouncing back from their earlier losses. For astute investors, Mid-Cap and Small-Cap stocks often shine during times of turmoil. [EasyDNNnews:PaidContentStart]

Moving investments from the Indian equity market to the US’ debt market, as suggested by some theories related to rising bond yields, appears impractical given the sheer potential of the Indian market. Therefore, there’s minimal incentive for foreign portfolio investors and high net worth individuals to shift their investments to the US’ bond market. When we turn our focus to fiscal metrics, such as GST and tax revenues, they paint a positive picture of the Indian economy. Private capital expenditure is on the rise, driven by various projects and acquisitions. Moreover, the reduction in corporate taxes has led to impressive earnings’ growth, with the potential for continued growth in FY 2024. 

Recent global tensions have impacted financial markets, leading to declines in global stock indices and increased yields, crude oil prices and gold values, reflecting a risk-off sentiment among investors. Interestingly, the historical correlation between Brent crude oil prices and the Nifty 50 TRI performance reveals a mild negative relationship. This suggests that long-term investors who remain patient have consistently achieved returns exceeding 9 per cent since 2012, despite fluctuations in oil prices. These observations highlight the multifaceted nature of market dynamics, influenced by a mix of global and domestic factors. 

Geopolitical uncertainties and bond yields reached multi-year highs. Meanwhile, Bitcoin has emerged as an unexpected star. In fact, Bitcoin’s growing acceptance is underscored by influential figures like Larry Fink, CEO of BlackRock, who now views crypto currencies as a “flight to quality” and a hedge against currency devaluation. Many nations, including those in Africa and Latin America, are embracing crypto currencies, with some even declaring Bitcoin as legal tender. Even major economies like the EU, US, Mexico, Brazil and Israel acknowledge the legitimacy of crypto currencies. 

As we return to the Indian stock market, a sense of cautious optimism prevails. India’s corporate and financial leverage is relatively low, and interest rates are expected to remain manageable. However, alternative assets like fixed-income securities, precious metals, and crypto currencies may momentarily divert investments from equities. From a technical perspective, the Nifty index’s recent ‘throwback’ to a critical support range suggests potential support. Despite recent challenges, equities are likely to maintain their prominence in the long term. The coming weeks may see frontline indices regaining relative strength, offering a ray of hope for investors. 
 

Information Technology

In a world marked by rapid digital, economic and societal shifts, IT departments have taken on a pivotal role in helping businesses navigate this dynamic macroeconomic landscape. They stand at the forefront, shouldering the responsibility of enhancing efficiency, fostering productivity, and revamping their technological infrastructure to align with ever-evolving business needs. In the face of a continuously changing industry and shifting customer demands, IT departments are pivotal in addressing these challenges through innovative technological solutions. The S and P BSE Information Technology index has shown an impressive gain of 12.96 per cent over the past six months, reaching 31,068.47 points. 

Tata Consultancy Services (TCS), India’s largest IT services company, recorded a profit of ₹ 11,380 crore in Q2FY24, reflecting a YoY increase of 14.64 per cent from ₹ 9,926 crore in Q2FY24. There was a sequential increase in profit by 2.33 per cent. TCS’ revenue increased YoY by 7.92 per cent to ₹ 59.692 crore, with a sequential increase of 0.52 per cent. TCS is making remarkable progress in several sectors and receiving widespread recognition. Their collaboration with VIAVI Solutions, a global network solutions provider, is advancing 5G technology through O-RAN test solutions. 

TCS’s dedication to driving telecommunications advancements is evident. In the healthcare field, TCS stands out as a leader in healthcare data and analytics services, as acknowledged by Everest Group. This underscores their expertise in leveraging data and analytics to enhance healthcare. Additionally, TCS has been recognised as the top ‘Engineering Services Provider of the Year’ by Everest Group, solidifying their leadership in engineering services. These achievements underscore TCS’s excellence across various sectors, from telecommunications and healthcare to intellectual property and engineering services. 

As a global leader in IT services and consulting, TCS continues to drive innovation and deliver valuable solutions worldwide. In Q2FY24, Infosys reported impressive financial results with net sales of ₹ 38,994 crore, marking a 2.7 per cent sequential increase from the previous quarter (Q1FY24). Compared to the same period in the previous year (Q2FY23), its net sales surged 6.7 per cent. The net profit for Q2FY24 reached ₹ 6,215 crore, reflecting both sequential and year-over-year growth, with a 4.54 per cent increase from Q1FY24 and a 3.13 per cent increase from Q2FY23. Infosys also enhanced its operating margins, showing a substantial 20 basis points (bps) increase. 

These results underline Infosys’s robust performance, emphasising its continued success and resilience in the IT sector. HCL Technologies reported its financial results for the quarter ended September, disclosing a consolidated net profit of ₹ 26,672 crore. This signifies a 6.42 per cent increase compared to the same period the previous year when the net profit stood at ₹ 24,686 crore. Additionally, the net profit saw a 1.42 per cent sequential rise from ₹ 26,296 crore in the previous quarter. The profit after tax (PAT) also registered a 9.9 per cent increase, reaching ₹ 3,833 crore in the second quarter, compared to ₹ 3,487 crore in the same period last year. These results reflect HCL Technologies’ strong financial performance and growth. 
 

Banking

In a forward-looking step, Prime Minister Narendra Modi recently unveiled a collaborative effort between India and Sri Lanka in the financial technology (fintech) sector. The initiative involves linking the Unified Payments Interface (UPI) with Lanka Pay, signalling the joint commitment of both nations to enhance financial technology connectivity and cooperation. Meanwhile, the Reserve Bank of India (RBI) recently concluded a sell-buy foreign exchange swap, where banks procured US dollars from the central bank while agreeing to sell an equivalent sum of dollars at the swap’s maturity. With a maturity date of October 23, this strategic move effectively pumped in around ₹ 40,000 crore into the banking system. 

Such swaps play a pivotal role in infusing rupee liquidity into the banking system, contributing to monetary stability and overall financial operations. On another front, the Small Industries Development Bank of India (SIDBI) introduced an innovative ‘Growth Accelerator Programme’. This programme aims to empower small non-banking financial companies (NBFCs) to qualify for bank funding. Collaborating with the Finance Industry Development Council and the Global Alliance for Mass Entrepreneurship, SIDBI’s inaugural cohort comprises 18 small NBFCs. The programme’s overarching objective is to stimulate growth and financial inclusion among these small NBFCs, ultimately facilitating their access to crucial funding resources. 

HDFC Bank has reported impressive financial growth in its latest quarterly results, with consolidated net sales surging by 80 per cent YoY to ₹ 75,039.1 crore for the quarter ending on September 30. The bank also achieved a significant 55.09 per cent YoY growth in consolidated net profit, reaching ₹ 17,312.38 crore. Additionally, HDFC Bank reported consolidated earnings per share (EPS) of ₹ 22.2. With a robust capital adequacy ratio of 19.5 per cent, the bank is wellpositioned for continued growth. ICICI Bank, a prominent private sector bank in India, provides a wide-ranging array of financial products and services to cater to the needs of retail, small-sized and medium-sized enterprises (SMEs) and corporate customers. 

The company’s financial performance in Q2-2024 was impressive, with the profit before tax (PBT) surging by 35.7 per cent year-on-year, reaching ₹ 13,731 crore. Additionally, the core operating profit exhibited substantial growth, increasing by 21.7 per cent year-on-year to ₹ 14,314 crore in Q2 FY 2024. Looking at the deposit portfolio, the period-end total deposits experienced strong growth, increasing by 18.8 per cent year-on-year and 4.5 per cent quarter-on-quarter as of September 30, 2023. Term deposits also showed remarkable growth, rising by 31.8 per cent YoY and 9.2 per cent per cent QoQ as of the same date. 
 

Sensex Constituents

Reliance Industries Limited achieved record-breaking results in the last quarter, with EBITDA reaching an impressive ₹ 44,867 crore, marking a substantial 30 per cent year-on-year increase. This exceptional performance extended across all segments, showcasing the company’s robust operating capabilities. Furthermore, the net profit for the same period amounted to ₹ 19,878 crore, also reflecting a substantial 30 per cent year-onyear growth. The company’s consumer businesses demonstrated strong growth, driven by a commitment to delivering superior experiences and maintaining a seamless ecosystem. 

Notably, the retail segment achieved its highest-ever quarterly EBITDA, driven by robust footfalls and an 80 basis points margin expansion. The digital services sector experienced significant growth due to network leadership, an increase in subscribers, and a growing adoption of 5G technology. The oil-to-chemicals (O2C) segment continued its strong performance, benefiting from robust domestic demand, firm fuel cracks, and a positive PVC delta. Additionally, the oil and gas segment saw improvements, primarily attributed to the ramp-up in KG D6 gas production. These results collectively highlight the company’s outstanding performance in various business segments. 

Hindustan Unilever operates in the fast-moving consumer goods (FMCG) sector, with a primary focus on three key segments: home care, beauty and personal care, and foods and refreshments. In the second quarter of 2023, the company reported noteworthy growth in its financial performance. Total sales for the quarter reached ₹ 15,027 crore, showing a 4 per cent increase compared to the same period in the previous year, which stood at ₹ 14,514 crore. The net profit for the second quarter of 2023 also displayed notable growth, amounting to ₹ 2,717 crore, reflecting a 4 per cent increase from the net profit of ₹ 2,616 crore in the same quarter of the previous year. These figures collectively indicate a strong and positive financial performance during the reported period.

Overview

In the context of year-over-year (YoY) net profit growth, certain sectors emerged as gainers, indicating substantial increases in their net profits. Notably, the cement and cement products sector displayed remarkable growth with an impressive YoY net profit surge of 227.6 per cent. Similarly, the other industrial products sector experienced notable gains in its net profit, recording a significant YoY growth of 160.4 per cent. The internet software and services sector demonstrated strong performance, achieving a remarkable 131.3 per cent increase in YoY net profit. 

The iron and steel products sector also posted positive figures, with a YoY net profit growth of 73.5 per cent. Furthermore, the electric utilities sector exhibited substantial improvements in net profit, with a notable YoY growth of 62.5 per cent. These figures underscore the diverse performance of different sectors, with these specific sectors showing robust growth in net profit over the specified period. When examining the year-over-year (YoY) net profit growth of various sectors, some sectors experienced significant declines, categorising them as losers in this regard. 

Notably, the broadcasting and cable TV sector faced substantial challenges, with a notable YoY net profit decline of 68.8 per cent. Similarly, the agrochemicals sector recorded a considerable decrease in net profit, with a significant YoY decline of 41 per cent. The transportation and logistics sector also saw a noteworthy reduction in net profit, reflecting a YoY decline of 36.6 per cent. These figures indicate the varying performance of different sectors, with these particular sectors encountering significant decreases in net profit over the specified period, categorising them as losers in terms of YoY net profit growth. 

Click here to download the list Quarterly Result Highlights 2023 

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