Q3 Results: The New Dawn

The equity market has once again started gaining new highs. One of the reasons for such a stupendous performance is better-than-expected earnings’ growth of corporate India. The article highlights the performances of various sectors and outlines the reasons for this impressive recovery

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If stock prices are the slaves of earnings’ growth, then at this point the master is ordering and the slave is obediently carrying out the commands. After showing a minor correction in the last week of January, the equity market has once again started gaining new highs. Benchmark equity indices such as Nifty and Sensex have crossed the psychological level of 15,000 and 51,000, respectively. Other sectoral as well as broader equity indices are also showing a rise in respective indices. The following graph shows the performance of some of these indices year-till-date as on February 5, reflecting the earnings from these sectors.

One of the reasons for such a stupendous performance is better-than-expected earnings’ growth of corporate India. It will be the second such consecutive quarter when we will be witnessing earnings of India Inc. getting upgraded. To put things in perspective, it has come almost after six years of continuous downgrades. To give you a sense of the quantum of outperformance, the top five listed Indian companies in India by quarterly profit have beaten the consensus estimates by a huge margin. For example, at the start of Q3FY21 it was estimated that Reliance Industries, India’s largest company by profit, will post net profit of ₹9,940 crore while the actual profit came in at ₹14,819 crore. Other companies like TCS and Infosys have also exceeded the street estimates in terms of profit.