Cyclical sectors seen driving India Inc’s performance in Q4

India Inc’s overall performance in the January-March quarter is likely to mirror the previous quarter’s showing as select sectors such as fast moving consumer goods, two-wheelers and real estate are gradually recovering from the demonetisation induced drag on sales, said analysts.

Export-driven sectors such as information technology and pharmaceuticals are likely to report muted results. Telecom will show the impact of aggressive pricing.

Antique Stock Broking and Edelweiss Securities expect the companies they track to report year-on-year topline and net profit growth in the range of 12-17 per cent and 21-30 per cent, respectively.

“The January-March FY17 net profit for (our) coverage universe is likely to rise by about 30 per cent year-on-year (yoy), which is broadly in line with the growth (about 29 per cent) seen in the preceding quarter as well,” said Antique.

For Nifty companies, these brokerages expect 15 per cent and 12-14 per cent topline and bottomline growth, respectively, in Q4.

Key sectors Brokerages hold the view that growth in earnings would be led by cyclical sectors such as public sector banks, capital goods, power, metals and oil and gas. Retail-focused private banks are also likely to continue their resilient performance.

ICICI Securities, in a note, said: “Excluding financial services, oil and gas, and metals, the topline is expected to grow 0.9 per cent, operating margins are expected to contract 110 basis points to 20 per cent, and earnings are expected to decline 5.9 per cent.”

The broking firm elaborated that higher crude oil prices (up 57 per cent y-o-y/ 9 per cent sequentially) will benefit oil & gas companies while metals and mining will be driven by both volume and realisation growth.

It added that a pick-up in the execution cycle will lead to better results in the capital goods space, while asset addition and generation will drive growth in the power sector.

On the cement sector, there are mixed views on volumes. While Antique expects volume growth to surprise positively, ICICI Securities expects them to decline. Edelweiss expects cement companies to witness flat to low single-digit topline growth.