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*SMC Global Institutional Equities*
*Q1FY20 Earnings Preview*
• Corporate earnings likely to remain subdued during the quarter as well
• Markets expectations of earnings recovery is unlikely to come true during the quarter as well. The slowing GDP number itself indicates that probably all is not well in the economy. In the previous quarter there was already some visible slow down in the consumption pattern which seems to have got further impacted during the quarter. And when consumption gets impacted even other industries also can remain insulated for sure. Accordingly we feel the overall earnings of the corporate are likely to have moderated during the quarter and the earnings recovery gets delayed further.
• Indian currency has been stable for large part of the quarter and hence forex related gains and losses are unlikely for corporate. IT & Pharma Companies generally get positive benefit when the Indian currency is weak vis a vis others as majority of them are export oriented in nature. IT companies have received some decent deals during the quarter, however the margin improvement is unlikely for the corporate during the quarter.
• System wide credit growth has slowed down a bit to 12% vs ~13-14% like previous quarters. In Q4FY19 the NBFC led liquidity crisis did hit consumption to some extent and NBFC witnessed slow down in the business growth. During the current quarter also it seems the slowdown in NBFC would continue as getting low cost funds has not been easy task for them.
• While there has been enough liquidity when looking at the system the liquidity crunch with NBFC is severe and accordingly RBI has further tried to infuse liquidity to help the well managed NBFCs but helping Banks to purchase their pooled assets.
• Mid cap companies under our coverage having business interest in Chemicals would have a challenging quarter. While structurally there is no major negative for the sector the large user industries of the Chemicals are going through some slowdown and hence there will be some volume and pricing growth issues during the quarter. Stocks like companies like NOCIL , Apcotex and Bodal will have a soft quarter due to lack of volumes.
• Our channel checks on ground shows that there has been good amount of pick up on the completion of Infrastructure projects and hence pipe companies like APL Apollo and Hitech Pipes could see impressive results during the quarter. The provisional volume figures released by these companies have been encouraging.
*Link to Report:*
*Research Analyst*
Siddharth Purohit
*Research Analyst*
Ankit Merchant
*Research Associate*
Udit Gajiwala
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Why EXID & AMRJ down 4%+ with vols
-Industry sources says they have cut pxs recently by 5-7% recently to deal with weak demand.
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In last 19 years baring 2002 and 2000, Nifty has never closed July month below the low of June month.
#AceEquities
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