Contrary to expectations, small and medium companies were less impacted by demonetisation than bigger firms which helped the former do better in the October-December quarter.

According to Motilal Oswal, sales, operating profit and net profit of large companies in Nifty grew 4.9 per cent, 9.6 per cent and 10.3 per cent respectively, this quarter compared to the same period last year. On the other hand, sales, operating profit and adjusted net profit of 483 companies in the CNX 500 grew 7.1 per cent, 11.6 per cent and 24.2 per cent respectively, according to data provided by Capitaline.

Even if one widens the universe to 2,702 companies listed on the NSE, the growth is higher than of the Nifty companies at 5.9 per cent (sales), 12.6 per cent (operating profit) and 25 per cent (adjusted net profit).

Sustaining trend

“This trend of smaller companies doing better than larger ones has been on for the last three-four quarters. Many mid-cap companies have unique business models, while large companies in fast-moving consumer goods, information technology and banks have got hit,” said G Chokkalingam, Founder, Equinomics Advisory and Research.

Though large companies lagged their smaller counterparts, performance has been better than analysts’ expectations. Hence, downward revision of earnings estimates has been few or marginal. “Year-to-date Nifty FY17 and FY18 consensus earnings were downgraded by 2.7 per cent and 5.3 per cent respectively, and the pace of downgrade remained static (28 downgrades against 30 in Q2FY17),” ICICI Securities said.

Motilal Oswal has cut FY17 and FY18 earnings estimates marginally by 3.2 per cent and 2 per cent, respectively. It now expects Sensex EPS to decline marginally by 0.5 per cent in FY17 and grow 24 per cent in FY18.

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