Liquidity crisis and risk aversion post defaults by the IL&FS group had a wide ranging impact on availability of funds to consumers, businesses as well as investors. The sharp fluctuation in crude oil prices and forex rates also adversely affected business confidence. The volatility in cost of raw materials and demand slowdown dented the OPM. The negative shocks largely neutralized the benefit of the peak festive season. Thus, the decent growth rates of the September 2018 quarter even without festivals could not be sustained in the December 2018 quarter despite the festive season.

Including PSU banks and PSU oil and gas companies, Corporate India's consolidated priority sales were up 17% but Pat attributed to owners inclined only 8% in the quarter ended December 2018 compared with the quarter ended December 2017. Excluding only PSU oil and gas companies, Corporate India's consolidated priority sales were up 15% but Pat attributed to owners increased 19% due to the sharp turnaround posted by few PSU banks.

Consolidated priority sales of Corporate India excluding PSU banks and PSU oil and gas companies were up 15% and the OPM improved to 19.8% from 19.6% in the trailing 12 months ended December 2018 over a year ago. After the 9% incline in OI and 17% higher provision for interest, PBDT increased 13%. After a 12% rise in provision for depreciation and 15% jump in provision for tax, Pat attributed to owners improved 13%.

Industries posting profit in the December 2018 quarter compared with losses in the corresponding previous quarter included solvent extraction and textiles-cotton and blended. Industries reporting a sharp increase in profit consisted of textiles-products, steel-medium and small, shipping, paper, steel-pig iron, electronics- components, electronics-graphites, steel-sponge iron, castings and forgings, cables-telephone.

Among the industries, airlines, textile-composite, telecommunication-equipment, construction, air-conditioners registered losses in the December 2018 quarter compared with profit in the corresponding previous quarter. Losses of industries such as telecommunication-service providers and computers-hardware widened.

Industries notching a sharp fall in profit comprised travel agencies, petrochemicals, cement-south India, textiles-jute, fertilizers, refineries, aquaculture, sugar, housing finance, printing and stationery and pharmaceuticals-Indian-formulations.

Among large industrial groups, PSUs did the best, with a 30% jump in profit attributable to owners on 17% higher sales. The Tatas also performed well, with 22% incline in profit on 13% improvement in sales. Profit of MNC associates went up 7% on 9% expansion in sales. Vodafone Idea's losses marred the Aditya Birla group's show.

Among the index constituents, the S&P BSE Small-cap index companies showed the best growth rate of 55% in Pat on 14% increase in sales. Pat of the S&P BSE Mid-cap companies grew 14% on 14% higher sales. The CNX Nifty companies fared poorly, with only 3% incline in Pat on 21% more sales compared with the S&P BSE Sensex companies' 6% incline in Pat on 21% spurt in sales. Considering the entire universe, small-sized companies did not fare satisfactorily as their losses widened 7% on 15% decrease in sales. Medium-sized companies put up a better show than large-sized companies.

About 50% of the companies reported an increase and 50% a decline in Pat. Pat of most companies (11.2% of the total) slid more than 75%. The number of companies (332) notching profit in the quarter compared with losses in the corresponding previous quarter was lower than the number of companies (448) recording losses in this quarter compared with profit a year ago .

Companies displaying better-than-expected results were Bharti Infratel, IndusInd Bank, Tata Steel, Wipro, Axis Bank and HSIL.

State Bank of India, Oriental Bank of Commerce, Ruchi Soya, Union Bank, Corporation Bank, Syndicate Bank, DLF, Assam Company and Punjab & Sind Bank were among the companies recording a positive turnaround (profit against losses).

Companies registering a sharp incline in profit comprised Amber Enterprises, Neuland Labs, Ester Industries, Tata Communications, Bharat Dynamics, Indbull RealEstate, Relaince Capital, Sail, IOL Chemicals, Nahar Spinning, TV18 Broadcast, Veritas (India), Nava Bharat Ventures, Sun Pharma, Torrent Pharma, Bank of Baroda, MMTC, Ugar Sugar Works, JSW Energy, Dynamatic Technologies, Mazda, Oriental Aeromatics, WPIL, International Paper, Hind Rectifiers and Frontier Spings.

Companies reporting lower-than-expected results included JSW Steel, Tata Motors, ONGC, HPCL, Blue Star, Rallis. Companies recording a sharp fall in Pat comprised Jindal Staineless, Future Enterprises, NHPC, Weizmann Forex, Amrapali Industries, Sangam India, IOCL, Motilal Oswal Fiancials, Patel Engineering, IOCL, HPCL, Sanghi Industries, India Cements and Shankara Building Products.

Companies with a negative turnaround (losses against profit) consisted of MRPL, CPCL, Jet Airways, New India Assurance, Bharti Airtel, Lupin, GTL Infra, STC, Bombay Dyeing, Zuari Agro, Reliance Communications and Unitech.

The Sensex started the December 2018 quarter at around 36,227 and ended down 0.4% at about 36,068. It was trading at 36,064 on 1 March 2019. Frontline stocks continue to be supported by foreign and domestic institutional investors. Mid and small caps remain volatile and under pressure, largely ignoring the results and outlook. Election-related uncertainty and scarcity of funds are adversely affecting sentiments for mid and small caps.

The severe liquidity crunch witnessed in December 2018 quarter is easing, especially after the Reserve Bank of India (RBI) announced a surprise rate cut and change in stand and commentary to indicate more rate cuts ahead instead of increase in interest rates and tightening of liquidity indicated earlier. While availability of money has improved post the RBI announcement, bank lending and deposit rates have not come down. There is expectation of another rate cut in April, leading to reduction in both lending and deposit rates. Optimism on the US-China trade deal has improved the global environment but, at the same time, commodity prices are hardening.

Normally, pre- and post-general election, consumption goes up but industrial capex slows down. Infra order inflow and execution pick up in the run-up to the elections but lose momentum post-election. Ultimately, revival of business and investor confidence in the short term will depend on the outcome of the Lok Sabha election.