Performance of India Inc in the March 2018 quarter is unlikely to be any different or change significantly compared to the previous quarter. In other words, growth in sales and profit will be robust especially in sectors like automobiles, auto-ancillary, consumption, metals, oil and gas, retail-focussed banks, non-banking finance and capital goods, according to various brokerages.

However, the incremental uptick in growth rate may fade as favourable base of demonetisation was provided by December 2016 quarter and reduced by the end of same quarter last year (March 2017 quarter).

While topline growth is expected to continue to be in strong double digits (around 15 per cent according to majority of analysts) and is likely to reflect an improving demand scenario, profitability will show some strain led by operating margin pressure (due to lack of pricing power) and higher tax burden, said analysts.

Sales, operating profit

Emkay Research expects sales, operating profit and net profit of its universe (excluding oil and gas and financials) to grow 9 per cent, 11 per cent and 4.2 per cent respectively year-on-year in March 2018 quarter compared to 11.3 per cent, 13 per cent and 14.6 per cent respectively y-o-y in the previous quarter (December 2017). Kotak Institutional Equities expects earnings of its universe to grow at an even lower rate of 7 per cent followed by Antique stock broking 2 per cent (5.5 per cent ex-banks). For Nifty companies, Antique and Kotak expect 4 per cent growth in earnings. While corporate lenders and telecom companies are expected to drag overall performance, information technology and pharmaceuticals will be relative underperformers, according to analysts. Kotak and Edelweiss Securities expect banks (corporate lenders) and telecom to report net loss while the latter has catagorised performance of exports oriented sectors under “bad” (flat growth).

Overall, FY18 is expected to be the seventh consecutive year of earnings downgrade and sub-10 per cent growth (5-7 per cent for Nifty companies according to consensus view) and the same is likely to continue even in FY19, according to Edelweiss. “Current estimates imply an asking rate of 25 per cent plus for FY19, making earnings prone to downgrade,” it said.

Antique also has a similar view and added that risk is with the financials sector, which is expected to contribute 37 per cent of incremental earnings between FY18 and FY20.

Commodity sector

Even the commodity sector is a key risk as more than 80 per cent of current earnings growth is dependent on commodities, according to analysts. Escalation of global trade conflicts also pose risk to the nascent positive spillover of the ongoing global recovery on the Indian corporate performance, they added.

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