Moderate growth in profits for Q1
With worries of a monsoon receding, market watchers are now waiting for the first quarter results season — which starts with Infosys next week. Analysts expect a moderation in India Inc’s performance —growth rates are expected to fall and lower margins are expected. Sectors expected to do well include metals, financial services and automobiles. Telecom and cement are expected to be the laggards during the quarter.
Brokerage house Motilal Oswal expects the 30 companies of the BSE Sensex to record a 19 per cent growth in total profits. This is lower compared to the second half of FY10, when Sensex firms saw a 31 per cent growth in earnings. The steady growth in corporate earnings, says the broker, provides a cover against sharp falls. However, given the high valuations, equity markets are unlikely to go up in a meaningful way — keeping the markets trading within a range.
Citigroup expects the Sensex firms (excluding oil and gas) to show an increase of 16 per cent in first quarter profits. Citi says that this is lower than the 27 per cent growth in profits the brokerage had projected for FY11 — indicating that expectations for future are likely to be toned down. The growth in profits is lower than the 31 per cent jump seen in sales — indicating a pressure on margins, says the brokerage. Compared to the last year and the last quarter, margins this time are expected to be lower, says Edelweiss. Apart from higher salaries, sectors are also witnessing rising raw material costs, lower product prices and rising salary costs.
The second half of FY10 had been favourable for companies as sales began to improve, while raw material costs were low. For the full year, Sensex companies are expected to show a 28 per cent jump in profits — leading to an earnings per share of Rs 1,052.
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