We think the results season will reinforce some of our thoughts on earnings and lead to a market correction. First, results should be weak. The headline profit growth for Q1 FY13 for Sensex companies is likely to be 13.7 per cent. However, excluding SBI (large write-off the previous year), earnings should grow 9.7 per cent.
Secondly, sales growth is expected to start dragging earnings while margins stabilise at lower levels. Estimated sales growth at 16.7 per cent is the lowest sales growth expected in the last 10 quarters.
Margins meanwhile, though lower y-o-y, should stabilise in the 16.5-17 per cent band. Lastly, we continue to expect more downgrades for FY13 EPS even as the pace of downgrade may slow going forward.