Wipro and CEAT shares came under heavy selling pressure on Friday, with the shares falling as much as 8 per cent and 5 per cent respectively after they had reported their first-quarter (Q1) earnings. Investors were unimpressed with the results and the markets punished both stocks.
Wipro stocks fell after the IT giant reported mixed Q1 results and gave a cautious outlook for the future. Although the company remained able to see demand in some business segments, investor sentiment was affected by slower discretionary spending, pricing pressure and an uncertain global macroeconomic environment. Analysts said low guidance on revenue growth had also accounted for the stock’s drop.
CEAT shares also fell after the company’s earnings announcement. It had a good quarter-on-quarter but still had concerns about profit growth and margins, and rising input costs from a tyre company that was growing. The market was closely following management commentary about demand and future costs, which influenced market sentiment.
Both stocks fell on the back of the market’s cautious stance towards companies that either missed earnings estimates in the first quarter or provided conservative guidance for the rest of the year. Investors are eagerly awaiting quarterly results from the earnings season to understand the impact of global economic uncertainty, inflationary pressures and sector-based problems on the stock market and thus what is the economic landscape.
Despite the big crash, longer term investors should focus on business fundamentals rather than the market reaction, analysts say. How much better earnings growth, margin improvement and management execution will be the key to Wipro’s and CEAT’s performance in the next quarter in the long run as well.
The Q1 earnings season continues to be volatile in Indian equity markets, which rewards companies that outperform expectations but punishes those that disclose a poor financial performance or cautious outlook.
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