Q1 FY20 earnings likely to be tepid: IDFC Mutual Fund's Anoop Bhasker

IDFC Mutual Fund expects the June quarter earnings to be tepid as most high-frequency indicators indicate a slowdown, said Anoop Bhasker, Head-Equity IDFC Mutual Fund.

“Management commentary with reference to growth outlook across industries will be keenly watched,” Bhasker said in the outlook report from IDFC Mutual Fund.

The earnings season concluded on a mixed note, with the BSE200 earnings companies reporting a strong growth off a weak base (largely aided by corporate banks) and worries of a slowdown in consumption, which was led by the auto industry, also dampened the market's mood.

In the June quarter, 11.3 percent of the BSE200 index saw an upgrade of 2 percent in FY20 earnings, whereas 55.3 percent of the index saw a downgrade, the report stated.

“Downgrades were more visible in the stable segment with 40 percent stables and 15.3 percent witnessing downgrades in excess of 2 percent. Similarly, 8.4 percent of cyclicals were upgraded,” Bhasker stated.

After the Fed’s June monetary policy committee (MPC) meeting, economists have pulled forward their expectations of 25 bps rate cuts to July and September, as compared to their previous expectations in September and December.)

Global markets surged in June with the MSCI world index rising 6.4 percent MoM, up 3.4 percent for the quarter with equal contribution from developed markets and emerging markets.

Bhasker said oil rose sharply in June with WTI (West Texas Intermediate) rising 9 percent and Brent rising 3 percent month-on-month to close at $66.5/barrel. For the quarter though, Brent fell 3 percent quarter-on-quarter and still trades at a comfortable range for the India economy.