Reliance fell 5% on Monday on the back of the numbers. Did Reliance deserve that?
Given that most of the companies are delivering very strong numbers, a bit of profit booking is being seen in bigger companies despite strong performances. In this kind of an environment, if there is a miss on operating profit on standalone business, there would definitely be some reaction.
Also, in the case of Jio, the growth was not in line with expectations. After a very strong outperformance by Reliance in the last seven to eight months, if the results are not beating the expectations, obviously there would be some reaction and people would want to rotate their money into other names. So I think it is absolutely justified.
However, this correction would give an opportunity to people who could not participate in the Reliance story earlier to enter the stock as things are looking pretty okay from a one-two year perspective.
Axis Bank is the first big corporate bank which will be coming out with numbers today. What to expect?
The result season is very critical for all the companies and more so for the larger companies, particularly private sector banks. What we really need to see is whether there is a broad-based participation by the larger companies in the growth that we are seeing around. Also if there is enough growth in the loan segment and how the asset quality picture is looking like. Given that Axis Bank and to some extent ICICI Bank have not really performed vis-a-vis an HDFC Bank and some of the NBFCs, these numbers would give one slightly more confidence into what kind of upside we can expect in terms of the quarterly numbers.
It is very important that we have some clarity on the broad parameters of growth and asset quality from Axis Bank.
What about the L&T numbers and the commentary coming through?
L&T numbers by and large are pretty good across parameters like order inflow, order book growth, execution as well as working capital management. Though the core performance was a bit soft compared to expectations, on many of these qualitative parameters, the management concall and the outlook is turning far more positive.
The order book is 8% right now of the total balance sheet size and will grow to 16% by the year end. Even on the working capital side we are looking at about 20% growth over next one year. As we are in a revival mode at the economy level and the management commentary is so strong, we are quite positive on L&T performance.
A report from Edelweiss says that it is a non-consensus call but steel prices have run up largely because of supply constraints and those supply constraints are getting normalised. Will the runup in steel, cement stocks sustain as high prices are impacting margins?
Whenever we see price hikes in sectors like steel and cement, there is going to be noise and some indications from the government but at the end of the day, what the market would want to focus on is what is driving up the prices and how long this may continue and what kind of impact it can have on the performances?
As far as cement is concerned, we do not think there is too much concern because the price hike has not been that great versus the input costs and overall the outlook is getting better. So, we continue to be extremely positive on cement. As far as steel is concerned, it is a function of the international markets where China plays a role and where government intention would not have much of a bearing. So yes, there might be some volatility in steel prices globally but overall, it makes more sense to be positive on the sector.