Here are the key takeaways across the top 10 sectors:
Information Technology (IT): The guidance and earnings across companies so far have been in keeping with the thesis of gradually improving demand environment. This has reflected more strongly in tier-II IT, where organic constant currency (CC) revenue growth in multiple companies has been over 15 per cent. Also, the supporting rupee-dollar exchange rate has ensured that the momentum reflected in revenues is not offset by any profitability concerns.
Banks: Private Banks continued to report steady trends in loan growth, though there has been a slight decline in margins for several banks including IndusInd Bank, Kotak Mahindra Bank, YES Bank and HDFC Bank, among others. CASA growth has moderated across the system, further pushing up the funding cost. The loan portfolio is largely expected to be re-priced over second half of 2018-19 (FY19).
Non-banking financial companies (NBFC): Most NBFCs continue to report strong numbers on the business front. All vehicle financiers have reported strong growth, but Cholamandalam Investment and Finance Company (CIFC) has reported margin decline in the vehicle finance segment. Large housing finance companies (HFCs) have reported in-line numbers while small HFCs have seen disbursements slow down meaningfully. Yields for smaller HFCs are on the decline due to competitive pressures.
Autos: While raw material cost pressure continued in 1QFY19, companies able to manage cost pressures including Ashok Leyland, Maruti Suzuki, Ceat, Escorts have reported in-line/better than estimated operating performance. Original equipment manufacturers (OEMs) indicated further impact of raw material inflation in second quarter of FY19, which will partially be offset by appropriate price hikes. Demand outlook for FY19 remains strong, with double-digit volume growth guidance in passenger vehicles, two-wheelers and commercial vehicles backed by healthy demand momentum in rural areas.
Consumer: First quarter of FY19 is turning out to be the fourth consecutive quarter of rural sales growth outstripping urban growth, with positive commentary going forward as well. Passing on ongoing material cost increases will be a challenge, and therefore, a margin risk for companies that are not seeing growth visibility.
Oil & Gas: Gas transmission, distribution and importing companies all have reported good results with expansion in margins as well as volumes. We expect volume growth to remain strong.
Cement companies have shown healthy volume growth, led by growth in underlying markets.
Sequential increase in realization was led by better pricing in the East, Central and West markets, partially offset by weaker pricing in the North and the South.
Telecom: Both the telecom companies posted muted numbers with continued pressure on average revenue per user (ARPU) and margins. Our key concern is that the continued cash burn by Idea and Bharti has severely dented their balance sheets, restricting their capability to fight competition and invest in networks at the same time.
Metals: Steel companies continue to report quarter-on-quarter expansion in margins led by strong demand and pricing. JSW steel has already reported good set of numbers. SAIL, JSPL and Tata steel are likely to follow the trend. On the other hand, Vedanta missed estimates and is facing challenges in many businesses - aluminium is most vulnerable.
Capital Goods: Capital Goods companies have declared a strong set of results, operationally. Revenue growth has been supported by healthy execution of projects in hand and margin improvement despite rise in raw material prices, driven by cost rationalization, better revenue mix, operating leverage, and value engineering.