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Infosys will kick-start on Tuesday the fourth quarter earnings season, which most Indian companies expect to be a stellar three-month period.
Better forex earnings and growing optimism about a “progressive” Government being formed after the general elections boosted the fourth quarter performance compared to the previous and the year-ago periods, say analysts.
Key driver“The fourth quarter earnings for the Sensex (companies) will grow 13 per cent year-on-year, continuing the trend of the last couple of quarters. Weak currency will be the key driver of year-on-year earnings growth during the quarter,” according to brokerage firm Motilal Oswal’s India Strategy report. On the other hand, the Nifty companies are expected to record 9-10 per cent bottomline growth. This would be the third consecutive quarter of double-digit expansion following negative growth in the first quarter of FY14. Companies expected to register top net profit are Tata Consultancy Services (49 per cent), Dr Reddy’s Laboratories (39 per cent), Wipro (33 per cent), HDFC Bank (25 per cent) and Sun Pharmaceutical Industries (23 per cent).
Companies expected to register a fall in net profit are BHEL (46 per cent year-on-year), State Bank of India (17 per cent), Hindalco (16 per cent), Mahindra & Mahindra (9 per cent) and Maruti (7 per cent), according to the report.
“We expect banking and capital goods sectors to be the laggards this quarter while oil and gas, IT and pharmaceuticals will do well. We expect these three sectors to deliver bottomline growth of more than 20 per cent,” said Gaurav Dua, head of research at Sharekhan Securities.
Closely watchedAmong the major companies, Infosys’ results will be most closely watched, and a 9-10 per cent growth guidance would boost market confidence. TCS and HCL are expected to record growth of over 40 per cent, he said.Moreover, the Street expects the new government to put in place policies that foster growth. “Companies wish to be ahead of the curve and, hence, they are beginning to invest in increasing capacity,” said Kishor P Ostwal, Chairman and Managing Director at CNI Research.
Revenues of banks are expected to be moderate as growth in advances slowed last year, while in the capital goods sector, the larger companies, it is feared, will pull down performance.
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