the north face gillet Consumption companies face tough Q3 on note ban
After a good September quarter, consumption companies face a tough third quarter due to ban on Rs 500 and Rs 1,000 notes, but long term growth expectations stay intact, say experts.
Small firms would also be hit the most in the October December quarter as liquidity would dry up hitting demand, according to experts.
note ban would impact consumption oriented sector the most in the third quarter, slowing growth till liquidity returns. But it tough to predict which companies would fare well and which won Small companies could be impacted due to shortage of working capital, affecting business operations in the short term, Gautam Duggad, head of research institutional equities, Motilal Oswal Financial Services Ltd, told DNA Money.
In the long run, however, this move coupled with GST augurs well and would aid the shift towards organised trade across sectors, he said.
The Q2 results were mixed bag with most companies meeting analysts estimates, though concerns over long term profitability and operating margins stayed.
double digit profit growth, easing deflationary pressures and improvement in oil prices, metals and minerals, Q2 was better than June quarter. The FMCG sector has fared well and will continue to grow, along with automobile, considering companies like Maruti have done well. While cement does not provide much hope, crop protection has grown with Coromandel International performing well, G Chokkalingam, founder and MD of Equinomics Research Advisory Pvt Ltd, said.
Despite upbeat results by large caps and midcaps, banking and IT stocks watered down investor sentiment in Q2. Adani Ports and Asian Paints maintained optimism. Auto, cement, capital goods, metals and oil gas came as pleasant surprises, media and financials lagged behind.
slowdown in growth can be attributed to three distinct trends deteriorating macro environment, captive shift and insourcing and consulting led growth in digital, said a Kotak Institutional Equities report.