The monsoon has been good so far, due to good spread despite volatility in timing and quantum: (a) cumulative quantum at just 5% below normal due to late start, (b) spread in all key monsoondependent agri- states, and (c) monsoon withdrawal from Rajasthan delayed to 15 Sept (vs. 1st Sept normally). IMD is expecting abovenormal rainfall in North, East and North East till 23-28 Sept and higher rainfall in South from 24 Sept, even though its Sept forecasts are below normal. Overall sowing is up 5% YoY given high acreage in pulses. While reservoir levels in South India remain a concern (43% below average), onset of Rabi season monsoon (usually from 20 Oct) will be the key monitorable.

Q1 earnings surprise ratio for 160 companies (vs. our estimates) has been the best of the past 2 years at 44%, while disappoint ratio was 33%. Earnings (ex OMCs) from our universe bettered expectations by ~350 bps at 1% YoY. However excluding major drags (TAMO, PSBs and Resources) earnings grew by a healthy 12% YoY (vs 7% estimated), the fastest in past 8 quarters. EBITDA growth (ex OMCs) was in-line and grew by ~8% YoY on the back of lower commodity prices. Earnings for 28 Sensex companies saw a YoY decline of 1%, but Sensex ex-TAMO growth is 8% (vs 4% est). 

Sensex consensus EPS estimates for FY17 & FY18 saw downgrades of ~70 and 100 bps respectively during Q1FY17 results season. Since the beginning of Apr-16, consensus EPS estimates saw cuts of 1.7% for FY17 and 1.4% for FY18. EPS for FY17 is currently at Rs 1598 and FY18 at Rs 1895.

With likely postponement of a Fed rate hike to December post the release of Aug retail sales and industrial production data, key monitorables are CPI data due today and FOMC policy next week. Another monitorable is Crude, which fell on oversupply concerns as Libya and Nigeria aim to increase exports. The news on Deutsche Bank’s refusal to pay amounts sought by US is also a concern.

In the immediate term, market uncertainties include Fed action, possible SUUTI stake sales and the progress of monsoons.