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Corporate earnings surprised on the upside due to improvement in margins

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New Delhi, Feb 24 (IANS) The corporate earnings momentum has improved significantly since FY20.

Earnings have surprised on the upside in the recent past, driven by an improvement in margins, foreign brokerage Nomura said in a research report.

“We think, from hereon, margin levers are limited and growth will be largely dependent on volume growth,” it said.

“We are constructive on earnings growth in the medium term supported by government policies and its impact on macro factors. The earnings-to-GDP ratio can continue to improve,” it added.

The corporate earnings-to-GDP ratio, which has recorded a consistent decline since the Global Financial Crisis (GFC), has rebounded since FY20. Most segments, particularly the commodity-consuming manufacturing sector, have recorded strong growth since FY20, Nomura said.

In an analysis of a set of 232 companies (referred as BSE 200+), which are part of the BSE 200 index and coverage universe, net earnings recorded 30 per cent y-o-y earnings growth.

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Excluding financials, commodities and telecom, where earnings tend to be volatile, the aggregate earnings growth was strong at 22 per cent y-o-y. The earnings momentum has improved in the recent past as the four-year CAGR between 3QFY20-24 is at 32.3 per cent, vs 2.9 per cent between 3QFY16-20.

On aggregate, net earnings were 4 per cent higher than street expectations, the research said.

The year-on-year growth was particularly strong in cement, autos, and infrastructure/transport/logistics (including airline). The growth was muted in IT services and consumer staples, but on aggregate the earnings were ahead of consensus estimates.

The market expects the Nifty 100 index to record 28.4 per cent earnings growth in FY24E aided by strong profits in the oil and gas sector and financials.

For FY25E and FY26E, earnings growth expectations are modest at 12.1 per cent and 13.3 per cent y-o-y, respectively.

Financials will contribute 38 per cent to the incremental earnings of the Nifty 100 over FY24-26E, as per consensus estimates. Earnings growth is expected to moderate across most sectors over the next two years vs FY24 owing to a high base, the research said.

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The growth will be driven by increase in volumes as margin levers have already played out. Slowdown in economic growth and higher commodity prices are the key risks to the market’s current earnings estimates.

“We think capex, along with domestic manufacturing, will lay the foundation for earnings growth in the medium term,” the report said.

–IANS

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Modi 3.0: Stock markets to touch new high in 1 yr, say global rating agencies

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New Delhi, June 16 (IANS) Indian stock markets have seen a robust rally since the new government’s formation, closing at an all-time high in the last week. According to top rating agencies, the indices are set to gain new highs in the next 12 months.

It was the second consecutive week when Indian frontline indices Sensex and Nifty made a new all-time high of 77,145 and 23,490 respectively, as inflation cooled off.

The stock market is attracting global funds which are going to accelerate soon.

Moreover, the stock markets have emerged as a favourite investment destination for retail investors.

According to global rating agency Moody’s, its “12-month forward BSE Sensex target is 82,000, implying 14 per cent upside”.

In its latest report, Moody’s said that the key benefit to the market of the NDA’s re-election is “policy predictability, which will influence how growth and equity return pan out in the coming five years”.

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“We believe the government is likely to continue focusing on macro stability (i.e., inflation hawkishness) to inform policy,” according to the report.

“With government continuity now in place, we believe the market can look forward to further structural reforms, giving us more confidence in the earnings cycle. Macro stability with rising GDP growth relative to real rates should extend India’s outperformance over emerging markets equities,” it added.

According to Moody’s, India’s stock market has been making new highs, and the debate now is over what could take the market materially higher.

“In our view, the government’s mandate is likely to result in policy changes that will lengthen the earnings cycle and surprise the market,” it emphasised.

With Modi 3.0 in power, more will come over the next five years in the form of positive structural shifts.

Moreover, India has reclaimed the fourth-biggest global equity market tag from Hong Kong. The country’s market capitalisation soared 10 per cent to reach $5.2 trillion.

ALSO READ:  Nifty hit six new record highs this year indicating India's bull market

In comparison, Hong Kong’s equity market cap is $5.17 trillion, down 5.4 per cent from the high of $5.47 trillion this year.

At present, India is the second-largest emerging market after China.

Global investors now prioritise liquidity and can’t afford to ignore the Indian stock market, which is booming with retail investments, according to global analysts.

–IANS

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Collective action required to achieve renewable energy targets: MoS Shripad Yesso Naik

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New Delhi, June 16 (IANS) Collective action is required to achieve renewable energy targets, making India a leader in wind energy and creating a greener, brighter future for all, Minister of State of New and Renewable Energy and Power, Shripad Yesso Naik, said.

Speaking on the ‘Global Wind Day’, MoS Naik congratulated Gujarat, Karnataka and Tamil Nadu for achieving the highest wind capacity addition in the country during FY 2023-24.

Bhupinder Singh Bhalla, Secretary, MNRE, said that combining solar and wind energy is essential for a reliable grid and meet the country’s target of 500 GW renewable energy capacity by 2030 and net zero by 2070.

India has a history of wind energy generation spanning more than four decades.

With a cumulative installed wind power capacity of 46.4 GW by May, it has progressed to become the fourth largest in the world.

Bhalla highlighted the previous year’s achievements and motivated the stakeholders to collaborate to realise the short term as well as long term goal for the sector.

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The event witnessed panel discussions on the potential of both onshore and offshore wind energy, with the active participation from Central and state government authorities, manufacturers and developers, academia, think tanks, and other key stakeholders.

–IANS

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India's first Metro stretch to be upgraded with aluminum third rails

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Kolkata, June 15 (IANS) India’s first Metro link, between Tollygunge (Mahanayak Uttam Kumar) and Dum Dum stations in Kolkata, is going through a major upgrade nearly 30 years after its completion.

The 16.45 km stretch was completed in 1995 though trains were already running between the intermediate stations (the 3.4 km stretch between Esplanade and Bhowanipur) since 1984.

The Metro Railway has now taken up the replacement of the steel current conducting third rail with an aluminum one. This will not only be energy efficient, but also ensure faster running of trains.

According to Metro engineers, the change will ensure 84 per cent reduction in energy loss, which is Rs 1 crore per year per km.

For the entire stretch, this amounts to Rs 16.45 crore per year.

“Such replacements have already taken place in older Metro stretches in the world like in Singapore, London, Moscow, Berlin, Munich, and Istanbul. The new stretches that we introduced in Kolkata, such as the East-West and Joka-Taratala corridors, have aluminum third rails.

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“Work has already started from Noapara (the carshed beyond Dum Dum) and it is expected to be completed in the next two years. A German company has been entrusted with the project. Normal services will not be hampered during the upgradation process,” said Kausik Mitra, CPRO, Metro Railway.

The high-conductive aluminum third rail will have a stainless-steel top. It will have the capacity to reduce system voltage drops and subsequent energy losses, thanks to its superior electrical conductivity.

This reduction in voltage drop in the third rail will allow quicker acceleration. This will also allow the Metro Railway to increase frequency during peak hours. The huge energy savings will bring down operational costs.

The expense involved in replacing the third rail would be realised within three years due to a drop in operational costs.

Additionally, the aluminum third rail will reduce carbon emissions by 50,000 tonnes in its lifetime. The aluminum rail also requires less maintenance and will be highly reliable and stable in a hot and humid city like Kolkata.

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Less heat will also be generated inside the tunnel when the Third Rail Current Collector (TRCC) comes into contact with the third rail. No welding will be required to join two aluminum rails, as it can be done with the help of a splice joint. This will help in maintaining air quality inside the tunnel,” Mitra said.

–IANS

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Indian stock markets breaking global benchmarks in equity market cap

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New Delhi, June 15 (IANS) As Indian stock markets continue to touch fresh new highs almost every day post the formation of the new government, they are also breaking global benchmarks.

In a new feat, India has reclaimed the fourth-biggest global equity market tag from Hong Kong.

The country’s market capitalisation soared 10 per cent to reach $5.2 trillion (BSE-listed companies).

In comparison, Hong Kong’s equity market cap is $5.17 trillion, down 5.4 per cent from the high of $5.47 trillion this year.

On a price-to-book basis, India trades at 3 times, while Hong Kong is at just one time.

This comes as the Indian stock market has seen a significant rally in recent months and is now attracting global funds which are going to accelerate in the near future.

The National Stock Exchange (NSE) benchmark Nifty surged nearly 6 per cent in the last month and 11.84 per cent in the last six months.

ALSO READ:  Sensex closes 111 points up after intra-day volatility

According to market analysts, Nifty is expected to reach 25,816 in the next 12 months.

The Prabhudas Lilladher experts anticipate that the BJP-led NDA government will sustain its focus on capital expenditure-driven growth, particularly in sectors such as production-linked incentives (PLI), infrastructure development, including roads, ports, aviation, defence, railways, and green energy.

This expectation is supported by a 20 bps reduction in the fiscal deficit for FY24, normal monsoon forecasts, and an anticipated dividend of Rs 2.1 trillion from the RBI.

The analysts expect the NDA government to increase focus on farmers, rural, urban poor and middle class to arrest the impact of new social engineering-cum-freebies led reversal in certain states in recent elections

Meanwhile, the stock markets have emerged as a favourite investment destination for retail investors.

According to experts, the major driving forces in this bull market are the Indian retail investors, including HNIs, and big selling by the FIIs is getting eclipsed by the aggressive buying of DIIs and retail investors.

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–IANS

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ONGC, Oil India Ltd to gain as Govt cuts windfall tax on crude oil

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New Delhi, June 15 (IANS) The Government has reduced the windfall tax on petroleum crude to Rs 3,250 per metric tonne from Rs 5,200 with effect from June 15 as prices of crude oil have declined in the international market compared to the previous fortnight.

Upstream oil exploration and production companies ONGC and Oil India Ltd will benefit from the announcement as they have to pay the windfall tax on their crude oil output.

The tax is revised every fortnight based on the average crude price of the preceding fortnight.

In the earlier fortnight beginning June 1, the government had reduced the windfall tax on crude to Rs 5,200 per metric tonne from Rs 5,700.

The windfall tax on crude was as high as Rs 8,400 in the first fortnight of May as part of its fortnightly revision that is calibrated with global prices.

This is the second fortnightly cut in windfall tax in a row after a Rs 8,400 per metric tonne reduction from Rs 9,600 on May 1.

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From July 2022, India started taxing crude oil production and exports of gasoline, diesel and aviation fuel to regulate private refiners which wanted to sell fuel overseas instead of locally to gain from robust refining margins.

The government had on April 16 raised the windfall tax on petroleum crude to Rs 9,600 a metric ton from Rs 6,800 because of the high crude oil prices at the time due to escalating geopolitical tensions. Crude prices had risen by 16 per cent in the first quarter of 2024 but have trended downward since then.

The windfall tax was also extended to exports of petrol, diesel and aviation fuel after private refineries started raking in big gains from overseas markets, instead of selling the fuels in the domestic market.

The government has left the windfall tax on these fuels unchanged in the current round.

–IANS

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