India Inc Q2 earnings: As rupee weighs, Banks, FMCG, NBFCs set to bring succour
Information technology, commodities and retail banks would drive profits in July-September quarter of this fiscal while the overall earnings of the corporate sector will remain tepid, according to stock brokerages.
Information technology, commodities and retail banks would drive profits in July-September quarter of this fiscal while the overall earnings of the corporate sector will remain tepid, according to stock brokerages. In its earnings preview, Edelweiss Securities said the second quarter is expected to be tepid with year-on-year profit growth for companies in its coverage universe likely to rise 3% and for corporate banks likely to contract 1%.
“This weakness is attributable to rising base and headwinds from input prices, and interest expenses rising ahead of growth cycle. The slowdown in profit growth is broad-based with rupee, interest rate and input prices being the swing factors,” the report said.
According to the Edelweiss report, over 15% profit growth is expected in commodities, retail banks and non-banking financial services, while domestic autos, pharma, cement and industrials are likely to post flat profit growth. Domestic auto has posted 20% of average growth over the last four years, it said.
A deep profit contraction is anticipated for sectors such as telecom, airlines, corporate banks and export auto. Phillip Capital India Research in its preview said the highest profit after tax growth will be seen in IT, NBFC, FMCG, speciality chemicals and capital goods while pharma, infra, cement, automobiles and banks will see contraction. However, FMCG earnings will be a “drag” in the second quarter due to the GST led high base and inflationary pressures.
“Rupee weakness to benefit IT services and pharma (revenues), pharma earnings would remain weak,” it said. For financials, margins will remain under pressure due to no major resolutions, while credit growth would gain momentum. NBFCs’ earnings growth is likely to be strong at 36%, aided by low base. For pharma, revenues will benefit from currwency weakness, but operating performance will be weak due to ongoing price pressure in the US generics business and higher raw material costs due to Chinese supply disruption.
Source: DNA Money