This time round, India Inc enjoys quarterly expectations

It’s the big-ticket sector as far as investments go. But apart from the headline-grabbing, Posco’s mega investment in Orissa, there’s more good news. Rising international steel prices (and hence domestic prices) are expected to be sustained in the near future, till the new capacities (particularly those coming up in China) further deteriorate the demand-supply balance. Firms are expected to maintain last quarter’s skyscraper growth in profitability. However, analysts feel there is a need for steel companies to improve operating profitability so as to withstand all phases of the steel price cycle.

Cement

After a long time, cement firms are looking at a booming Q2. With prices at all-time highs, the sector is expected to show strong growth. Interestingly, cement prices did not fall during the monsoons, usually a lean season. The road projects are expected to boost cement demand by about 4 million tonnes per annum. Housing demand is also expected to remain robust. With the fundamentals looking bright, firms are expected to maintain healthy growth rates in Q2.

Textiles

Gearing up for January 1, 2005, textile firms are investing and modernising at a furious pace. They will make healthy profits too, beating Q1 growth. Last year, cotton prices were high and profits were low; this time round, there will be a trend reversal. Garment and fabric industry is expected to be the major drivers of Q2 growth. Big players like Arvind Mills, Raymond and Vardhaman are expected to register good growth in Q2. Man- made fibres too are expected to maintain the growth momentum of the first quarter, which saw Indo-Rama registering a growth of 304.76 per cent in PAT.

Petroleum:

Will it become a victim of high international crude oil prices? While Q2 sales in petro products — diesel, kerosene, LPG and petrol — are expected to be higher than Q1, profitability will be hit by an increased subsidy burden and under recoveries. Moroever, sales of petro products in the month of August took a hit due to the truckers strike.

Total under recoveries for the industry as a whole has touched a whopping Rs 13,000 crore and is expected to go up with crude oil prices ruling at above $50 per barrel.

High refining margins give some solace and ONGC can expect some gains from high crude oil prices which in turn will improve its bottomline. Marketing firms like IOC, HPCL and BPCL are expected to take a hit.

IT/Telecom:

July to September, 2004 were not the IT industry’s busiest months — mega deals of the early part of the year did not revisit — but second quarter results for the still-sunrise sector are awaited with expectation. For one, TCS, whose IPO closed in August, had done spectacularly well in the first quarter, just before its IPO announcement. Similarly, Infosys Technologies says it expects to maintain growth at 39-40 per cent. Telecoms experts expect the sector to continue doing a good turn in coming days. In particular, the strong investment announcements made in the last few weeks have encouraged better prospects.

Pharma

There’s not much excitement in this sector gearing up for the product patent regime from January 1, 2005. Some of the companies will not show much growth as there was no growth triggers like new drug launches. It’s reflected on the stock markets too. In fact, pharma companies were not exactly on fire unlike some other sectors. In the absence of monthly despatch figures, analysts expect profits to grow by the same rate as last year, which is 5 to 6 per cent.

Banking

The rising interest rate scenario is expected to change the outlook for the banking sector. The core business of the banking sector will remain as profitable as before. However, the interest rate movements in the last quarter will have some impact on individual banks as they have invested heavily in government securities. Interest rate has gone up by around 110 basis points in the first quarter and 40 bps in the second quarter. Analysts say that private banks which have large mark-to-market portfolios will witness falling profits. On the other hand, PSU banks will be able to shift securities to HTM (held to maturity) basis and reduce losses.