Crisil, DSP Merrill expect muted performance from India Inc in Q1

India Inc will see lacklustre topline growth for the first quarter of FY16, according to DSP Merrill Lynch and Crisil Research.

Companies are likely to post 3 per cent year-on-year (y-o-y) growth on account of slow investment growth and softening commodity prices, said Crisil Research.

DSP Merrill Lynch expects earnings to see more downgrades. “Aggregate Sensex earnings expectation for FY16E continues to remain high. Consensus Sensex EPS growth for FY16 is about 23 per cent on a bottom up basis. We expect this to get downgraded to about 15 per cent,” said Anand Kumar, analyst at DSP Merrill Lynch.

For Crisil, decreasing global commodity prices will upset the topline growth of steel by 13-14 per cent, petrochemicals by 9-12 per cent due to correcting crude oil prices, while commodity chemical producers will see a decline of 18-19 per cent in Q1 FY16.

IT to gain on weaker rupee The IT sector is estimated to log in a growth rate of 16-18 per cent y-o-y on weaker rupee and rise in volume, while pharma companies will clock a moderate 10 per cent y-o-y growth in topline.

The auto sector is likely to grow at a slower pace of 6 per cent due to muted growth of overseas subsidiaries and decline in two-wheeler and tractor sales, Crisil said.

Telecom and FMCG will see 10-12 per cent and 6-8 per cent growth respectively, with telcos seeing improvement in operating metrics backed by higher usage of data services, while FMCG revenue growth would see higher realisation.

Power sector revenues are expected to grow 3-5 per cent y-o-y led by a rise in generation, and strong capacity additions by Adani Power, Reliance Power and GMR Infrastructure.

Coal sector revenues are estimated to increase 8-10 per cent on 7-8 per cent growth in sales, backed by higher production.

Revenue growth for construction and capital goods will remain sluggish on order backlog and slow project execution, while cement and distribution businesses will see marginal growth.

Expressing mixed views on sectors, Anand Kumar in a report said: “Mirroring the previous two quarters, the market is expecting to witness another quarter of weak earnings season, reinforcing our view that earnings recovery will be slow near term.”