Companies that are part of the Sensex have seen their worst profit growth in eight quarters during the three-month period ended on 31 March, according to an analysis of figures released by 22 firms that are part of the 30-stock benchmark index of the Bombay Stock Exchange.
The cumulative net profit growth of the 22 Sensex firms, which have so far released their results for the quarter, stands at 19.55 per cent, compared with the 38.07 per cent during the fourth quarter of the previous fiscal year and 22.8 per cent during the third quarter of 2007-08.
Two Sensex firms, DLF Ltd and Reliance Communications Ltd, were excluded from the analysis as comparable growth data for eight previous quarters were not available.
The growth in revenues has not seen any significant change, rising more than 25 per cent in the fourth quarter, compared with 26.4 per cent a year ago.
The other income of ICICI Bank Ltd, HDFC Bank Ltd and State Bank of India was added to the net sales as it is mostly fee income, apart from treasury income from trading in equities and bonds.
Across sectors, there is a significant slowdown in the growth of ‘other income’ for the Sensex companies because of the prevailing market conditions, which could have affected their treasury operations.
The analysis also indicates that one in every two stocks have gained more than the index during the recovery phase since mid-March.
The index hit its lowest level this year on 17 March, at 14,809.49, and has since then gained 18.8 per cent at 17,600.12 on Friday. Many analysts say this rally has been inspired by the relative easing of the credit crisis in western markets and the results season. Once the results season comes to an end, the stocks could take a downturn, as investors look back to fundamentals.
“Sensex may test 18,000 in the next two weeks before a downturn again,” said Deepak N. Lalwani, a director at London-based stockbroker Astaire and Partners Ltd.
Wipro Ltd is the highest gainer during this period, with its stock rising more than 41 per cent , even as it reported 1 per cent growth in profits for the fourth quarter. Two other technology heavy weights,Satyam Computer Services Ltd and Infosys Technologies Ltd gained 34-38 per cent.
Satyam posted 17.8 per cent growth in adjusted profit after tax (PAT), while Infosys saw a 5.16 per cent increase in profit.
Jaiprakash Associates Ltd, the latest addition in the Sensex, reported more than 61 per cent growth in profits in the quarter and the stock has moved 38 per cent since 17 March. Reliance Infrastructure Ltd (formerly Reliance Energy Ltd), which posted more than 31 per cent gain in net profits, saw its stock adding about 28 per cent.
The stock price of Housing Development Finance Corp. Ltd went up 25 per cent since mid-March. The company’s net profit growth was 13.8 per cent .
ICICI Bank and HDFC Bank posted net profits of 39.2 per cent and 37.12 per cent, respectively. Their stocks gained about 24 per cent each.
Reliance Industries Ltd, the largest component on the Sensex by market capitalisation, saw 23.9 per cent growth in net profit and a 35.8 per cent rise in sales. The stock gained about 23 per cent.
Telecommmunications services provider Bharti Airtel Ltd and the country’s largest realtor DLF Ltd also saw stock prices rise higher than the index. The Bharti stock has gained 21 per cent from mid-March, while DLF added around 19.4 per cent . Bharti reported more than 30 per cent growth in profits and 42 per cent growth in net sales.
Drug makers Ranbaxy Laboratories Ltd and Cipla Ltd, saw different trends in profit growth. While Ranbaxy’s profits were down 69.6 per cent , Cipla saw 42 per cent growth from a year ago. However both the stocks underperformed the Sensex since 17 March, adding 6-10 per cent to their prices.
Cement makers ACC Ltd and Ambuja Cements Ltd reported a fall in their net profit growth and the stocks lost 2-4 per cent from mid-March. A similar trend was witnessed in auto maker Maruti Suzuki India Ltd, whose reported net profit for the quarter was 33 per cent less than the year-ago period.
The Sensex firms which are yet to reports results include Tata Motors Ltd, Tata Steel Ltd, Oil and Natural Gas Corp. Ltd and Larsen and Toubro Ltd.