How are Long Duration Funds for investment, who should invest?

The third quarter of FY24 was a solid one for Indian Inc. As per experts,  profit growth of companies was more than 10% but earnings increased by less than 10%. But the question is, how did Nifty perform? Which sector performed well and which ones disappointed? As per the quarter results, where can you invest now?

As per brokerage house Motilal Oswal, in December quarter profit for the nifty companies displayed 17% YoY growth while the expected figure was above 11%. Five companies alone contributed 56% in growth, These are Tata Motors, HDFC Bank, Tata Steel, ICICI Bank and JSW Steel. While in first 9 months of FY24, from April to December, Nifty-50 company’s profit increased by 26%.

So, has there been any upgrade or downgrade by the broking house after the quarterly results? Based on the performance of the December quarter, Motilal Oswal has raised FY25 profits estimates for Tata Motors, Coal India, Hero MotoCorp, Cipla, and Bharti Airtel.

On the other hand, following disappointing results, Motilal Oswal has reduced profit estimates for UPL, LTI Mindtree, ITC, Divi’s Labs, and HUL.

This covers the quarterly results of Nifty-50 companies. But it is also important to understand the performance of selected sectors.

In the third quarter, there has been an 8.2% year-on-year growth in the revenue of 3,381 sampled companies, whereas in the same quarter of the previous year, the revenue growth of these companies was 17.3%, which means it was more than double. The revenue growth of companies in the first three quarters of FY24 was 5.3%, 5.9%, and 8.2%, respectively. However, excluding banks and NBFCs, the revenue growth of companies remained only 0.9%, 1.6%, and 4.5%.

Contrary to revenue, the growth of profits has been quite strong. During the quarter, the profit growth of these companies was 25%. However, in the same quarter of the previous year, there was a small base of 2.2%. It is noteworthy that in all three quarters of FY24, the profit growth of companies has been more than 10% from a psychological standpoint.

This way, the profit growth of companies has been better than analysts’ estimates. Results of companies in sectors such as auto, financials, capital goods, healthcare-pharma, telecom, building materials, metal, and oil-gas have been better than estimates. Meanwhile, according to broking house Prabhudas Lilladher, the demand for quarterly results of quick service restaurants (QSRs), retail, and consumer durable companies has been affected by the decrease. Additionally, after 26 quarters, there has been a slight decrease in the revenue of IT sector companies for the first time.

According to HDFC Securities, many companies that had shown high growth in the past quarters disappointed in this quarter, while several companies have shown significant growth for the first time in recent months.

According to Santosh Meena, HoR at Swastika InvestMart, “The results of PSU banks have been the strongest. Additionally, the growth in the auto, consumption, capital goods, hotel, and pharma sectors has been good. However, companies in the chemical sector have shown the most disappointment. The results of IT companies were as expected, there were no positive surprises, yet there was an uptick in these shares. Despite good results in select government banks, profit-taking was observed due to pressure on margins.”

So, which companies’ shares should be bought based on quarterly results? Santosh Meena believes that based on the results, one can consider buying shares in SBI, Cipla, Archean Chemical, Sonata Software, and Engineers India. Targets for 6-12 months are ₹880/1000 for SBI, ₹1700 for Cipla, and ₹1100 for Sonata Software. Meanwhile, with a perspective of 12-15 months, buying can be considered with targets of ₹1000 for Archean Chemical and ₹310 for Engineers India.”

Overall, in the third quarter, companies have witnessed a growth in profits of more than 10% for the third consecutive time. However, during this quarter, there have also been some changes in the list of companies performing well. With a perspective of 6-15 months, portfolios can be constructed with the help of select companies based on results.

(Disclaimer: Stocks recommendations by experts or brokerages are their own and not those of the website or its management. Money9.com advises readers to check with certified experts before taking any investment decisions.)