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March Quarter Earnings: What to expect
It is that time of the month when companies declare their quarterly financial results. This is called as the earnings season. Infosys will kick off the season on April 15.
Usually, stock markets fluctuate on the back of corporate results. If results either meet or exceed expectations, along with positive management commentary, then share prices rise. If they fail to meet expectations, stocks often sink. As a result, knowing what to expect can help you ride the market highs and take advantage of the lows.
Ahead of the earnings season, Kotak Institutional Equities published a report detailing the sector-wise outlook. Here are a few things to know:
The aggregate earnings of the 30 companies on the Sensex is expected to increase 7.4% from the previous year, according to the Kotak report. In the December quarter, the aggregate earnings jumped nearly 20% on annual basis. According to experts, the March quarter is not likely to be better than the previous two quarters. However, it is expected that the March quarter may signal a bottoming out of the slowdown. This means, in the next quarters, companies may grow faster.
Banks are likely to be the biggest laggard this season, reporting a 10% decline on year-on-year basis. While PSU banks face a high tax rate, private banks and non-banking finance companies (NBFCs) are likely to suffer from a slow loan growth and a rise in costs. Auto companies are likely to report a fall in profits on the back of weak volume growth and an increase in costs.
Consumer products companies are likely to report a surge in net income, according to the report. While they may see a 11.6% growth in revenues from the previous year, profit growth may slow down by nearly 12%. Oil marketing companies are also expected to report huge profits, due to a large compensation from the government, Kotak said. Companies in the telecom, media and pharma sectors may also report a strong growth in revenues in the quarter.
IT companies are not expected to report the bumper profit growths like the previous quarters. While smaller companies like Wipro, HCL Tech and Tech Mahindra are likely to report a strong growth, Infosys may see a fall in revenues QoQ. The key problem for the IT sector is the appreciation in the rupee. This is because IT companies earn mainly in dollars.
The net sales of top Indian companies may rise between 12.2% and 18.1% in the quarter ended March 2014, according to a LiveMint report. This comes at a time when high inflation, interest rates and a slowing demand has been plaguing Indian companies. The sales growth is likely to lead to a 7.4%-13.2% jump in net profit for the 30 companies that form the Sensex, the report added.