Indian companies likely to increase March quarter earnings

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Indian companies are likely to boost March quarter earnings on the back of faster-than-expected demand recovery on account of a low base effect. The market is likely to be focused on management commentary on the demand outlook, considering the uncertainties arising out of the second wave of covid-19 infections in India and the consequent regional restrictions.

Net profit for the 30-share Sensex is expected to rise 55% year-on-year (y-o-y) and 6% quarter-on-quarter, while Nifty 50 Index companies are likely to witness a 125% jump in net profit y-o-y and an 8% sequential rise. Fourth-quarter earnings have been started on 12 April when Tata Consultancy Services announces its numbers, followed by Infosys Ltd and Wipro on 14 April and 15 April, respectively. IT services firms are expected to post another boost quarter amid expectations of large deal wins and an improvement in demand, with businesses globally accelerating their digital transformation journey in the wake of the coronavirus outbreak. The auto industry is also likely to post a strong quarter because of strong volume growth and cost-cutting measures, partly offset by raw material headwinds. Banking sector earnings, too, are expected to show a sharp rise yearly on account of a low base, more so with the Supreme Court ruling out moratorium extension, waiver of interest, and standstill norms. The cement and infrastructure sectors are expected to show strong net profit growth, while infrastructure is expected to see a strong uptick in execution in the fourth quarter. Both the sectors are expected to benefit from the government’s continued thrust on infrastructure investments, especially inroads. Net profit for cement firms is likely to surge 53% y-o-y while revenue may jump 24% y-oy, according to brokerage house Sharekhan. Revenues of infra companies may advance 21.4%, while net profit may see marginal growth of 5% y-o-y.

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