The benchmark Nifty 50 index slumped to a seven-month low amid massive selling pressure. The Brent crude oil prices soared to a 14-year high of US$140 per barrel as market worried about the Russian oil flows coming into direct impact following the war as the western world imposed a flurry of trade and business sanctions on Russia.

The war has come at a time when the world was about to come out of the shadow of the covid-19 pandemic and could keep the near-term sentiments extremely cautious. For Indian stock markets, the selling in last three weeks was a continuation of a slide that has been hurting local stocks after the markets topped out in October 2021. The relentless selling by overseas investors has continued and taken a toll on not just the local equities but also on the Indian rupee, which tested an all-time low above 77 per US dollar.

Going back to basics of investing wisdom is likely to be a prudent strategy in the near term given that the current market scenario is being dominated by an event which is well outside the normal course of action. Earnings per share (EPS) is one of the commonly used metrics to judge the performance of the company from the investors point of view. EPS is calculated as a company's profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company's profitability. The higher a company's EPS, the more profitable it is considered. EPS indicates how much money a company makes for each share of its stock and is a widely used parameter for estimating corporate value. It tells shareholders how much money each share of their stock earned for the company.

Capital Market has looked at companies reporting an increase in EPS over the last four quarters. Taking the base of December 2020 for filtering out the companies based on rising EPS ensures that the performance of the companies is being judged against challenges posed by the hard-hitting second wave of covid-19 and an all-pervasive specter of elevated inflation, particularly in the second half of the calendar year 2021.

The initial reaction of the stock market to the current war has been expectedly bearish though the recent evidence suggests that modern markets are much more equipped to price in the worst-case outcomes of a cataclysmic event at an early stage. This was seen exactly around two years back when covid-19 first made global headlines and led investors in a state of panic worldwide.

The Indian equity market was severely impacted during the first outbreak of pandemic in March 2020 but managed to sustain the second outbreak in the beginning of FY22 well. The market remained steady despite exponential rise in cases across the country. The stock market moved in line with global peers and continued to remain in bullish trend. The market posted continuous weekly and daily gains even when the cases surged.

The first outbreak of the corona virus pandemic had rocked the market for a while. But indices surged to unprecedented levels, gaining more than 120 per cent in just 19 months. Just before the pandemic, it took five years for the market to witness a three-digit rise. The Indian markets have seen double-digit correction from their all-time highs. The Nifty 50 Price to Earnings (P/E) multiple has come down from its lofty levels of around 42x in February 2021 and is currently placed around 21x.

The world seemed to have come out of one of the biggest human miseries in centuries only to face the prospect of another one as worries regarding covid –19 was replaced by an all-out war between Russia and Ukraine. The International Monetary Fund (IMF) warned that the war in Ukraine is resulting in tragic loss of life and human suffering, as well as causing massive damage to Ukraine's physical infrastructure. The escalating war has sent a wave of more than 2 million refugees to neighboring countries.

IMF noted that unprecedented sanctions have been announced on Russia. While the situation remains highly fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very serious. Energy and commodity prices—including wheat and other grains—have surged, adding to inflationary pressures from supply chain disruptions and the rebound from the Covid 19 pandemic. Price shocks will have an impact worldwide, especially on poor households for whom food and fuel are a higher proportion of expenses. The sanctions on Russia will also have a substantial impact on the global economy and financial markets, with significant spillovers to other countries.

IMF noted that in many countries, the crisis is creating an adverse shock to both inflation and activity, amid already elevated price pressures. Monetary authorities will need to carefully monitor the pass-through of rising international prices to domestic inflation, to calibrate appropriate responses. Fiscal policy will need to support the most vulnerable households, to help offset rising living costs. This crisis will create complex policy tradeoffs, further complicating the policy landscape as the world economy recovers from the pandemic crisis.

The overall direction for the local stock markets appears to be quite uncertain given the tentative global scenario but strong support from domestic investors could cap losses for indices. The domestic equity mutual fund investors are cutting down on redemptions. Gross redemption of local equity funds in February fell to Rs 14,072 crore, the lowest in 20 months, show data from the Association of Mutual Funds in India. In the past year, the average was around Rs 21000 crore a month.

Mutual funds saw strong inflows into equity products for the twelfth month in a row. This has ensured that the losses for local stock markets are limited despite heavy selling by overseas investors. The FII holdings of domestic equity assets were at Rs 45.5 lakh crore as on February 28, representing 18% of aggregate listed stocks, down from 20% as of March 31, 2021.

Given the recent tendency of factoring in the eventual outcomes in the correct context is likely to trigger buying in beaten down stocks after the massive wave of correction that pulled down stocks well under their all-time picks. Nifty recorded a drop of around 14% from its all-time high when it tested a seven-month low under 16,000-mark in second week of March 2022. Out of the 50 Nifty companies, around 30 have dropped more than 20% during the same time.

This means that there are good investing opportunities for savvy investors in the current market. There were companies who reported consistent rise in their revenues quarter on quarter. EPS measures the amount of net income earned per share of stock outstanding. In other words, this is the amount of money each share of stock would receive if all the profits were distributed to the outstanding shareholders at the end of the year. EPS is very important for all the investors as it indicates that how much income is being earned by each ordinary shareholder. It gives an understanding of the profitability of the company.

Growth in earning per share indicates that by what percentage the earning per share has been increasing in comparison to the previous 12 months. A higher ratio indicates that the company's profitability has increased, and it is running its business efficiently. We have a list of 47 businesses that have reported continued quarter on quarter increase in their EPS from December 2021 onwards. The businesses belong to a wide spectrum of industries, reflecting the general improvement in domestic economic growth in last few quarters. The lack of a single dominating industry is also quite a good fit from the investing point of view given the current state of markets.

Outlook:

Out of the 47 companies which have reported a sustained increase in EPS over last four quarters, 5 companies reported negative returns in the calendar year 2021. However, out of these, only two counters saw sizable losses of more than 30% and both belonged to the micro finance industry. There are 32 stocks which have returned more than 50 per cent in the calendar year 2021.

In the year 2022, 29 stocks have fallen since the start of the year but out of these only 11 counters dropped more than 10%. The benchmark Nifty50 index has dropped more than 4% this year so far and the rest of the counters in the list have managed to beat the index overwhelmingly by providing positive returns. In fact, nine counters, i.e., Vishnu Chemicals, Yasho Industries, BCL Industries, Monarch Networth, Tinplate Co, Hindalco Inds, Ambika Cotton, Shivalik Bimetal and Cosmo Films have returned more than 10% so far in the calendar year.

Meanwhile, the ability of these companies to record constant increase in EPS on quarterly basis also indicates that their performance was immune to the surge in inflation in recent months. India's consumer price index gained 6.01% year-on-year in January, bigger than the 5.66% rise in December, data from the National Statistical Office showed. The food price inflation advanced to 5.43% from 4.05% in the previous month.

While the central bank expects inflation to average 5.3% in the fiscal year 2022 before moderating to 4.5% in FY 2023, companies managing to beat the price spiral in recent times will be able to do well in coming months given that the recent spurt in crude and metal prices will likely keep broad price pressures pretty much in place for Indian economy.

The menace of the Russia-Ukraine war has lifted global crude oil prices almost in a vertical manner. It will inflict a lot of pain for an economy like India which imports a major chunk of its oil requirements. Even if the prices moderate a little, unless a sizeable correction takes place, the impact of local inflationary trends will be severe.