4 sectors that had an impressive Q4 earnings season

Metals, banking and financial services, pharma and IT are the four sectors that reported strong earnings growth in the quarter gone by, says Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services. Edited excerpts:As per our assessments of Q4 earnings, there has been an overall growth in EPS. Results have not been too bad for corporate India. What have you made of the earnings trajectory? Is there any specific sector that stood out to you?The 14% earnings growth in FY21 has been the best in the last 11 years. That kind of a momentum in a pandemic year shows the underlying strength of corporate earnings. And now cases in the second wave are coming down sharply and vaccination is picking up. This will lead to a strong demand uptick in the coming quarters and that should only lead to a much higher growth rate. One sector that clearly stood out was metals. It has been at the forefront of the earnings growth. Some other sectors which did well were already factored in. For example, banking and financial space. On the back of lower provisioning and improvement in asset quality, they continued to report growth. Pharma and IT are the two other sectors that reported strong earnings growth in the quarter gone by.Where within the pharma space are you finding comfort now?While there have been opportunities in the last couple of months in the pharma space because of the vaccine, but if you look at the big picture there has been a huge demand growth in some developed markets. That is where you will see some large generic players doing very well in the coming quarters. In API, the incremental demand is shifting out of China into countries like India. That segment will continue to benefit on a longer timeframe. In the near-term, vaccine continues to give support to some key players. One should focus on the big macro picture which is improvement in demand, improvement in realisation and the biggest point is improvement in the regulatory environment, especially in US. That should be positive for large generic players as well as API manufacturers.Why the underperformance in Reliance even after a big bang 44th AGM?In Reliance there was some outperformance prior to the AGM in anticipation. If you look at the stock price performance vis-à-vis Nifty, there were a lot of expectations. The big announcement of entry into clean energy space is not a disappointment but it is a big capex plan that does come into play now. There are no define timelines to a lot of announcements. Overall, the company would continue to do well. The oil and gas segment could surprise with Saudi Aramco chairman joining the board. The problem is that we have not yet got the details and timeline of investments. As and when those are unveiled, it would definitely support the stock.What is the outlook when it comes to the entire real estate pocket?If you look at the overall trend, there has been an improvement in demand. Some of the companies have reported higher sales during the last few quarters. The realisation has largely remained stable. That has helped some of these companies to report good growth in numbers. While the recovery is being supported by the increasing demand for housing and low interest rates, we believe that the housing side could continue to do well in the coming quarters. The interest rates are low, savings are high and the focus of people on owning a house has improved post pandemic.

from Economic Times https://ift.tt/3dilKDT