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Journalism of Courage
After posting a remarkable 10% gains in the last fortnight,the Indian equity markets is awaiting the next big triggerthe Q4 results. According to various brokerage reports,the topline growth is expected to be robust across the board,while analysts are expecting a contraction in net margin in Q4FY11.
After an evident impact of higher input and interest costs in Q3 results for India Inc,analysts are expecting a further decline in the margins of broader market for the quarter ending March 2011. While to some extent the margin compression is factored in the current market pricing,any further negative surprise is expected to lead to downgrade of FY12 earnings,feel a set of analysts.
Revenue growth though are expected to be stronger especially led by sectors such as commodities,IT and other businesses that are consumer focused or have a have global business orientation. While sectors like FMCG and auto are likely to post strong topline growth owing to buoyant domestic demand,companies from the IT services space are expected to benefit from recovery in developed markets. While higher metal prices is expected to boost topline of metal companies,revenue growth of the oil and gas companies,particularly that of refiners are expected to be stellar,given higher oil prices and starting of the summer season in the northern hemisphere. Strong credit growth is also expected to prop up the topline growth of banks.
Banking space is expected to contribute the most to the overall earnings of the market. Besides healthy credit growth,the hike in lending rate and faster asset-repricing are expected to offset the negative impact of higher deposit growth on banks. Revenue growth of the PSU banks are expected to outdo that of private sector banks due to base effect even as slippages or NPAs remain a concern for PSUs over the short-term. In contrast,sectors like metals,telecom and utilities are expected to weigh heavily on overall market earnings in spite of healthy revenue growth.
For steel producers a sequential gain in their realisations following price hikes in the first two months of the quarter is expected to boost revenue growth. However,sharp rise in input cost,especially that of coking coal and iron ore is expected to drag down the overall profitability. For non-ferrous players while input cost remains high,it could get offset through rise in global metal prices.
Even as healthy subscriber additions are likely to result into stronger revenue growth for the telecom companies,revenue per minute is expected slip down. Besides,the cost drag is expected to come from 3G launch and network roll out as well as MNP-led promotional activities and pricing pressures. RCoM is feeling an additional pull of 3G related interest cost and licensing amortisation. Bharti on the other hand is expected to get a respite from margin expansion of its African business.
