In Q3FY22, companies across sectors such as cements, consumer durables, building materials, automobile, and FMCG witnessed the double whammy of muted demand and high input costs. Only sectors which saw a meaningful rise in their topline due to structural reasons escaped this situation unscathed.
The Hotels sector sprung a positive surprise in Q3 by riding the wave of higher leisure travel, which news pundits fondly call ‘revenge travel’. Many hospitality players such as Indian Hotels and EIH returned to black after six consecutive quarters of losses, led by material improvement in occupancy rates. The FY23 outlook for this sector looks bright as the world returns to normalcy.
Buoyed by higher transaction volumes in the stock markets, higher mutual fund SIPs and record IPOs in Q3, brokerage firms like ICICI Securities and Angel One saw their revenues and profits jump by over 50% YoY. However, higher market volatility and downward pressure on market returns could hit revenues for the capital market sector going forward.
Defence companies also posted a robust performance in Q3 led by a strong order pipeline thanks to the Center’s thrust on indigenization of defence products.
Performance of internet services companies like Tanla Platforms, Affle (India) and Brightcom Group continued to impress investors, with the increased usage of digital media and digital channels to conduct commerce and engage with customers.
While rising crude oil prices worked to the detriment of most manufacturing companies, it worked wonders for sales realizations of upstream oil companies like ONGC and Oil India. Notably, global oil prices might rise to US$120/bbl levels should the conflict between Russia and Ukraine escalate further. Russia is the third largest crude oil producer after the United States and Saudi Arabia.
Given the occurrence of the third Covid wave in January 2022 and the unabated upward trend in energy costs, it will be interesting to see which sectors hold their ground and which ones face the heat in Q4FY22.
