Q4 earnings estimates indicate gradual revival in economy, say brokerages

Weak currency will be the key driver of earnings growth’

Despite shrinking factory output in February and plunging car sales as well as widening trade deficit in March, the fourth quarter (Q4) earnings estimates by three brokerages indicate a gradual revival of the economy.

“Revenue growth of Nifty companies is expected to grow year-on-year at 14.9 per cent for the fourth quarter of 2013-14, better than the growth seen in the third quarter of the year. Moreover, the profit after tax growth of the Nifty companies is estimated to be at 7.9 per cent year-on-year,” said Prabhudas Lilladher in a report.

“The fourth quarter earnings for Sensex companies will grow 13 per cent year-on-year, continuing the trend of the last couple of quarters. Weak currency will be the key driver of earnings growth. With this, we expect 2013-14 Sensex earning per share to grow 12 per cent, down 1 per cent,” said Motilal Oswal Securities in its fourth quarter earnings estimates.

“India has been seeing early signs of improvement in various macro-economic parameters. The twin deficit problems have been addressed. Various measures taken by UPA-II have led to a gradual improvement in the industrial outlook. Inflation seems to be finally coming under control,” the report added.

Similarly, Religare Institutional Research in its Q4 preview said, “We expect another quarter (third) of double-digit revenue growth for Sensex (ex-oil) at 13.5 per cent year-on-year (18.9 per cent in Q3). However, aggregate profits are likely to drop to 3.2 per cent due to higher input costs and a weak currency”.

In a report on how the outcome of the general elections would decide the direction of the current upswing, Edelweiss Securities said: “In the past few months, India has seen remarkable progress on balance of payments front, with capital flows returning and rupee stabilising. Fiscal prudence has also returned after years of profligacy. This has helped stabilise the economy. However, signs of growth revival are few and far between.”

“The key obstacle in cyclical revival is elevated inflation. Another immediate challenge for the new government would be to carry forward the process of fiscal consolidation amidst depressed economy,” the report said.

The real economy would turnaround only gradually depending on how effectively the new government meets the challenges of inflation and fiscal deficit, it added.

This article taken from The Hindu : http://www.thehindu.com/business/Ec...-in-economy-say-brokerages/article5905956.ece
India Inc readies for a bright Q4

Infosys will kick-start on Tuesday the fourth quarter earnings season, which most Indian companies expect to be a stellar three-month period.

Better forex earnings and growing optimism about a “progressive” Government being formed after the general elections boosted the fourth quarter performance compared to the previous and the year-ago periods, say analysts.
Key driver

“The fourth quarter earnings for the Sensex (companies) will grow 13 per cent year-on-year, continuing the trend of the last couple of quarters. Weak currency will be the key driver of year-on-year earnings growth during the quarter,” according to brokerage firm Motilal Oswal’s India Strategy report. On the other hand, the Nifty companies are expected to record 9-10 per cent bottomline growth. This would be the third consecutive quarter of double-digit expansion following negative growth in the first quarter of FY14. Companies expected to register top net profit are Tata Consultancy Services (49 per cent), Dr Reddy’s Laboratories (39 per cent), Wipro (33 per cent), HDFC Bank (25 per cent) and Sun Pharmaceutical Industries (23 per cent).

Companies expected to register a fall in net profit are BHEL (46 per cent year-on-year), State Bank of India (17 per cent), Hindalco (16 per cent), Mahindra & Mahindra (9 per cent) and Maruti (7 per cent), according to the report.

“We expect banking and capital goods sectors to be the laggards this quarter while oil and gas, IT and pharmaceuticals will do well. We expect these three sectors to deliver bottomline growth of more than 20 per cent,” said Gaurav Dua, head of research at Sharekhan Securities.
Closely watched

Among the major companies, Infosys’ results will be most closely watched, and a 9-10 per cent growth guidance would boost market confidence. TCS and HCL are expected to record growth of over 40 per cent, he said.Moreover, the Street expects the new government to put in place policies that foster growth. “Companies wish to be ahead of the curve and, hence, they are beginning to invest in increasing capacity,” said Kishor P Ostwal, Chairman and Managing Director at CNI Research.

Revenues of banks are expected to be moderate as growth in advances slowed last year, while in the capital goods sector, the larger companies, it is feared, will pull down performance.

This article taken from The Hindu BusinessLine : http://www.thehindubusinessline.com/companies/india-inc-readies-for-a-bright-q4/article5912099.ece

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