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The 2QFY18 earnings season was notable in that it concluded without any disruption, despite being the first quarter post GST implementation. In fact, the quarter exhibited improving internals in the broader earnings mix, with more hits than misses. Re-stocking post GST rollout, retention of input tax credits and the early onset of the festive season this year v/s CY16 supported a few B2C sectors, while many corporates sounded optimistic about rural consumption revival, going ahead.
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Nifty earnings grew in double-digits for the first time after six quarters. For Nifty (Ex-OMCs), earnings growth of 10.5% was the highest in 13 quarters. The miss at PAT level for both MOSL and Nifty Universe can be entirely ascribed to OMCs.
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Improving earnings quality was also corroborated by the reducing proportion of companies reporting PAT decline (at 33% of our MOSL Universe - ~12 quarter low). Within our MOSL Universe, 14/17 sectors posted EBITDA and 11/17 sectors posted PAT that was either in line or ahead of expectations. The surprise/miss ratio at 1.3x was the best in 16 quarters.