Six Indian blue-chip companies have declared earnings so far - most of them lack the 'markets mojo'

• The first burst of quarterly earnings are out and six large companies HDFC Bank, Reliance Industries, TCS, Wipro, Infosys, and IndusInd Bank have declared their performance.
• While the trend has been positive in all but one case, the management commentary has been negative in three companies.
• HDFC Bank, the latest among the blue-chips to declare its earnings, lost over 3% in share value on Monday.

Six companies from the Sensex list -- HDFC Bank, Reliance Industries, TCS, Wipro, Infosys, IndusInd Bank and Yes Bank -- have declared their quarterly earnings so far. Markets Mojo, a gauge of the market mood on the website of the Bombay Stock Exchange (BSE), shows that the performance of four out of the six stocks are positive, the commentary around the prospects for these companies have turned down in three cases.


Banks in a bind

HDFC Bank, the latest among the blue-chips to declare its earnings, lost over 3% in share value on Monday. It was not just because the earnings were poor. Yes, the margin shrank a bit and the amount of bad loans rose but it was the pessimism in the management's commentary that did the stock in.

“The tone of management commentary may spook the markets. However, it is still one of the best managed banks out there,” Jefferies said in its report. HDFC Bank has reported a 23% growth in revenue and a 21% rise in net profit compared to a year earlier. The rise in bad loans from farmers was offset by a spike in other income.

IndusInd Bank, whose reported profit grew 38%, suffered from the fears of a spike in bad loans because of the company's exposure to the infrastructure lending giant IL&FS that has gone bust. The IL&FS crisis has cast a shadow of doubt on the entire financial sector in the country.


The slump in demand for cars and two-wheelers, the lack of enthusiasm among home buyers, and spiralling consumer demand overall have dented bank earnings overall.

Yes Bank's quarterly profit between April and June 2019 fell 91% compared to the same period a year ago, but it was still way better than estimates-- showing the lack of investor confidence. What propped up the stock on Monday were reports of a possible fund infusion in the troubled housing finance company DHFL, to which Yes Bank has lent money.



The elephant in the room

The stock of Reliance Industries (RIL), one of India's biggest conglomerates, got a fillip on the first trading day after its earnings. But truly, the investors were just celebrating the fact that the company's mainstay petrochemicals businesswas not doing as badly as they had feared. That alone was enough to prop up RIL's share price by over 2% on Monday.

The Mukesh Ambani-owned company has seen very good traction in its relatively new businesses like Reliance Jio and Reliance Retail but, as many analysts have pointed out, the core businesses petrochemicals and refining -- which make for the lion's share of the company's gross revenue-- are under threat. "Reduction in heavy crude oil supply post US sanctions, global refining capacity addition this year exceeding expected incremental demand, and slowdown in petchem demand as a result of the US-China spat will weigh on RIL’s refining and petchem business," a HDFC Securities report said.

Tech: Tightrope walk

India's top-tier software and IT service companies, TCS and Infosys, have had a bittersweet response from investors so far.

The slowdown in TCS' revenue and profit were on expected lines, according to the broking house Motilal Oswal. But investors have been driven the stock down since the earnings despite the company hinting at a double-digit growth for the full year.


Infosys did not have a standout quarter but the optimism in its outlook had investors upbeat. Infosys had projected a total growth 8.5% to 10% for the full year ending March 2020, which would imply a compounded quarterly growth 1.6% to 1.9%, according to a BOBCAPS research report.


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