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There are mixed views so far on the performance of Nifty 50 companies on the net profit front in the June quarter, though topline growth expectations remain the same — robust rate of growth between 18-25 per cent.
While Edelweiss Securities expects 22 per cent year-on-year profit growth for Nifty in Q1, Kotak Institutional Equities predicts 12 per cent rise. Further, Edelweiss expects growth in net profit for its coverage universe in Q1 to be better (13 per cent year-on-year) than in the March quarter (decline of 19 per cent), whereas Kotak expects net profit of its coverage universe to be flat y-o-y in Q1.
The better growth, according to Edelweiss, is because of the low base created due to GST de-stocking (June 2017 quarter profit had contracted by 7 per cent y-o-y) and rupee depreciation (4 per cent y-o-y) against the dollar helping export-driven sectors such as IT and pharma. Excluding commodities and corporate banks, net profit growth is expected to be even better.
The performance will be led by healthy double-digit growth by sectors such as information technology, automobiles, consumer, retail lenders and pharmaceuticals. As in the past several quarters, public sector banks and telecom will continue to disappoint due to high loan-loss provisions as well as mark-to-market losses on investment portfolio, and ARPU dilution thanks to intense competition, respectively.
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