Mercy for the rural economy:
On the first day of lockdown 2.0, the government has made a few welcoming moves. The lockdown restrictions are simplified from farmers, farmworkers, procurement, and transportation agencies. Fertilizers, pesticides and seeds manufacturers, as well as retailers, can also resume their activities. Fishing, milk processing plants, poultry farms & hatcheries are also exempted from tight lockdown which in turn will resume feeding & maintenance, harvesting, processing, packaging and cold chain sectors back into the mainstream.
Key takeaways: Lifting the restrictions from rural facing sectors will ensure livelihood to the rural workforce and facilitate free movement of vegetables, milk and fruits towards the cities.
Earnings season is upon us: What to expect?
The last quarter of the financial year 2020 is going to be a washed-out one in many ways. Nifty50 stocks are expected to report earnings de-growth of negative 2.5 - 3.0% while Energy, Metals and the Auto sectors being a key drag. Banks, IT, FMCG and cement are expected to be the key contributors to earnings.
Earnings for banking companies are likely to remain unaffected but the same cannot be said for the NBFCs. The top 4 Indian IT companies are expected to see muted sequential revenue growth in the range of 0 to 1% in organic constant currency (fixed exchange rate that eliminates fluctuations when calculating financial performance figures) terms and -2% -to 2% (-%1 to 4% in INR terms) quarter over quarter is expected for IT mid-cap companies.
The profitability of upstream oil companies is likely to get impacted due to sharp quarter over quarter contraction in crude oil prices and production cuts while domestic agrochemical companies are expected to report a strong quarter because of robust rabi reason.
Key takeaways: The Banking and IT sector are appearing to emerge unharmed from the lockdown crisis. But things should not be taken at face value. These key sectors are expected to see the effect of the current crisis in the first quarter of the 2021 financial year. Banks could see their Net Interest Income (NII) dropping, provisions increasing and asset quality deteriorating. At the same time, IT companies are expected to seeing new deals getting postponed and delay in existing projects hampering their growth outlook in the future.
Teji Picks of the day
Dr Reddy’s (NSE: DRREDDY)
Biocon Limited (NSE: BIOCON)
Axis Bank (NSE: AXISBANK)
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