September 2017 quarter is not expected to be very different from the past three quarters in terms of overall financial performance as India Inc is still reeling under the after effects of demonetisation in March quarter (first full quarter effect) and then goods and service tax implementation from July 1.

Though topline growth is expected to get a mild leg-up from restocking post GST, there is unlikely to be any major reprieve from operating margin or earnings front due to rising input costs, according to consensus view.

According to Edelweiss Securities, Nifty 50 companies are likely to see revenue growth of 13 per cent year-on-year in September quarter compared to higher single digit in the previous quarter (June). Also it expects operating profit and net profit to increase 8 per cent y-o-y each. Broader set of companies also likely to reflect a similar trend of profit growth lagging sales growth.

The overall performance is largely expected to be helped by few sectors such as commodities (be it oil or metals) followed by automobiles, consumer (restocking effect post GST) and private banks while majority of the large sectors such as information technology, pharmaceuticals, telecom, private domestic industrials and public sector banks are likely to continue witness pain.

Hopes on second half

There are hopes of a better second half with low base created by demonetisation. “Going ahead, H2-FY18E may witness a normalisation of the earnings trend as we expect a recovery in banking sector (moderation in provisioning for non-performing assets) and auto sector to be at the forefront of the trend. Also, support from cyclical sectors such as capital goods and cement will cushion recovery,” pointed out ICICI Direct in its preview note.

Nevertheless, risks remain for expectations of a lower double digit earnings growth for FY18 as the same has been nearly flat in the first half and entire burden has now shifted to second half.

Valuation has no longer been running ahead of fundamentals. After hitting 10,000 in July, Nifty has slipped under the five figure mark by the end of September quarter (mainly to external factors). The benchmark index has also been flat in Q2 with only 3 per cent gain (Nifty).

Range-bound

Prabhudas Liladher maintains the near-term trading range for the market to be between 9,500-10,500. “We see no reason to change our thought process at present unless we see any significant changes happening post results commentary from corporate or any fiscal change in the near term,” it said.

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