High expectations from Q4FY17 earnings may not materialise

With the companies gearing up to report March 2017 quarter (Q4FY17) and financial year 2016 - 17 (FY17) earnings soon, market participants believe the expectations from the upcoming corporate results season are high, given that the economy is still recovering from the demonetisation impact. The December quarter for India Inc was a mixed bag, with the impact of the note ban being partially offset by gains from higher commodity prices and treasury gains from rally in the domestic bond market. An earlier analysis by Business Standard suggests that the combined net profit (adjusted for exceptional gains and losses) of 1,660 companies across sectors was up 27.7% on a year-on-year (y-o-y) in Q3FY17, growing at the fastest pace in at least two years. Combined revenues (including operating and other income) for these companies rose 9.2% during the quarter - the fastest pace of growth in at least two years. Nifty Trading Tips

This performance, according to some market experts, was possibly buoyed by sales selectively being brought forward in November and December 2016. "We believe reported Q3 FY17 company results did not necessarily reflect the underlying business activity in the quarter and results were possibly buoyed by sales selectively being brought forward in November and December 2016. What also matters, in our view, is the extent of the second-order impact from negative feedback loop and prolonged adverse demand effects, which may be felt in Q4 FY17 and Q1 FY18," says Gautam Chhaochharia, head of India Research at UBS Securities in a co-authored report with Sanjena Dadawala. Future & Option Trading Tips