Riding on lower commodity prices, India Inc is likely to witness net profit growth in the December quarter. However, topline growth, which is the key signal for a recovery, will remain muted.

“For Q3FY16, our universe of companies (market cap $406 billion) across 10 sectors (ex-financials) is estimated to register flat topline, while net earnings are expected to decline by eight per cent (+3 per cent ex-metals),” pointed out Dolat Capital.

Crisil expects the top 600 companies, excluding financials and oil and gas, to report a muted topline growth of two per cent year-on-year in the December quarter due to poor rural demand, weak investment demand and Chennai floods affecting many sectors such as consumer discretionary, information technology, auto components and engineering.

Also, lower input costs have led to price cuts for many industries such as aviation, fast moving consumer goods, textiles and cement (except South India).

G Chokkalingam, Founder, Equinomics Research, expects at least five-six per cent growth in Nifty 50’s net profit. “Year-on-year growth in the December quarter net profit will be higher than the September quarter,” he said.

In Q2, companies forming part of S&P BSE Sensex reported de-growth of six per cent and two per cent in sales and net profit, respectively.

Overall, sectors such as FMCG, consumer durables, automobiles, media, retail and pharmaceuticals are likely to do well, according to analysts. “We forecast aggregate net sales growth of 7.9 per cent in Q3FY16 for our consumer coverage group – still subdued but good pick-up against 1.1 per cent in H1 on the back of improved performance from Titan, paint companies and ITC. We, however, expect profit growth to be better (12.8 per cent and 11.8 per cent growth in EBITDA and adjusted net profit) on the back of margin gains,” pointed out Richard Liu, analyst at JM Financial.

Within automobiles, passenger vehicles, medium and heavy commercial players have witnessed good volume growth in the December quarter. Additionally, the companies will benefit from lower input costs. On the other hand, sectors such as metals, cement, information technology and public sector banks are expected to continue to disappoint. While December is seasonally weak for IT companies, the subdued performance will be aggravated by Chennai floods where top IT companies have large presence.

Abhisar Jain, Metals & Mining Analyst- Centrum Broking, expects a repeat of lacklustre earnings from metals & mining universe due to poor performance by biggies like Tata Steel, JSW Steel, Vedanta and NMDC.

Overall, expectations are quite low for almost all sectors in the December quarter. Infosys is expected to kick off the earnings seasons on January 14.

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