First Quarter FY24: Earnings Review

Continuing with our discussion of the Bhagavad Gita, in the second chapter Arjuna completely surrenders himself to Shri Krishna and accepts his position as a disciple and Krishna as his Guru. He requests Krishna to guide him on how to dismiss his sorrow.

In Sanskrit, yoga means not only a technique or system of knowledge but also a state of mind or a condition. Every chapter in the Bhagavad Gita is about some yoga. Chapter 1 was Vishada Yoga which means a state of regret or sorrow. Chapter 2 is Sankhya yoga which means to attain knowledge through wisdom and become centered. Sankhya means numbers and Yoga means union hence Sankhya yoga means the union. Here is where Krishna asks Arjuna to get centered.

In the verses that follow – Krishna explains to Arjun (all of these are explained in more detail in the later chapters)

  • • Description of a Perfect Man/Woman - One whose mind is steady and one-pointed.
  • • Explanation of the main cause of all grief, which is ignorance of the true nature of the self.
  • • Karma Yoga - the discipline of selfless action without being attached to its fruits.

Like in Life, so in Markets, we must question conventional truth and accepted wisdom over time to gain wisdom and make sound investing decisions.

This month we will look at a few sectors and key points and then the overall earnings in 1QFY24.


Although the markets consolidated in August 2023 last month, defense and space sectors were in focus. Hindustan Aeronautics Limited (HAL) is emerging as a preferred partner in India for global aerospace giants. Safran Helicopter Engines and GE Aerospace have signed agreements with HAL to produce and develop helicopter and fighter jet engines. In our view, the pace of execution will determine the long-term returns of the stocks.

The sectors that did well this month have been Pharma, and IT and banks underperformed.

While banks have underperformed this month- Asset quality for Banking stocks continues to improve with healthy credit growth:

Pharma sector seeing some improvement in margins:

  • • There was positive commentary from both Indian and international players regarding the US generics market, with prices fairly stable as buyers focused more on dealing with product shortages.
  • • Price erosion, like what was seen last year seems unlikely to return.
  • • We are seeing increasing investment and commitment from global generic companies in biosimilars for future growth.



IT Sector Outperforms - Q1FY24 wasn’t much different from Q4FY23 on earnings. However, AI/Hi-tech were in focus this month and Auto engineering maintains high growth.

  • • Expectations on the AI front are building up in US Tech; Persistent is positioned better given its Hi-tech exposure followed by Latent View. Hi-tech commentary overall we believe will start to turn positive.
  • • KPIT and Tata Elxsi’s momentum in Autos is likely to persist and benefit from European exposure. We believe media and broadcast could also show signs of improvement from H2FY24 for Tata Elxsi.


Real estate – Home Prices Increase despite rising interest rates:

On a sequential (q-o-q) basis, The House Price Index (HPI) increased by 2.6% in 1QFY24. Eight of the ten cities witnessed housing registration price increase vis-a-vis the previous quarter as mentioned by RBI in its press release dated August 31, 2023. Even so one must note there is a divergence in demand between the affordable and premium home categories. The demand for premium homes continues to surge.

Overall 1QFY24 Earnings Season

Coming to the overall markets the recently concluded 1QFY24 earnings season clearly shows margin improvement continues for the second consecutive quarter:

Risks We See in the Markets

Skewed monsoon is a risk causing food inflation:

  • • Headline consumer price inflation is expected to remain elevated even in the month of August 2023 on the back of higher food prices.
  • • Monsoon remains patchy and has turned 7% deficient (cumulative during June 1, 2023 to August 26, 2023) as India is set to have recorded its driest August this year in the past 122 years since 1901 (Source: BQ Prime article dated September 02, 2023).

Promoters and PE Selling and Retail euphoric participation in IPOs may cause FOMO.

A large number of bulk deals have happened in the market as PE Firms and promoters sold their stakes to take advantage of the demand from Institutional investors. Deal flow picked up strongly in August 2023 with reported 24 block deals worth ~$1.8 billion executed, needs to be seen if any part of this selling translates into lower earnings going forward or is it to facilitate institutional participation, we believe it would be the latter.

We believe markets (Listed Equity Stock markets) are the best leveller for stock prices and management. The key to identifying good companies lies in their path to profitability, which in turn depends upon their execution and ability to change/help the way their customers carry out their functions. Over time, as they demonstrate their ability to scale up and grow profits, they are likely to find a place in portfolios. However, we believe the key is to buy not just the right company but also at the right price.

Getting Back to Chapter 2 on the Bhagavad Gita

We may have a question here: Why did Shri Krishna begin his teaching of the Gita by describing the eternal essence? Isn’t it a complex, abstract topic that all of us, including Arjuna, would have a hard time understanding? Couldn’t he have started with something simpler?

Here’s a possible answer. Like a good teacher, Shri Krishna described the end goal to his students before describing the means to attain that goal. This will generate interest, curiosity, focus and dedication from his disciples to listen to the rest of the chapters or maybe not.

Himani Shah
SVP – Investments & Research
Alchemy Capital Management Pvt. Ltd.

Alchemy Capital