Moneycontrol
Last Updated : Jul 05, 2013 11:10 PM IST | Source: CNBC-TV18

Brokerages forecast gloomy Q1 earnings season

Brokerages are warning that the upcoming earnings season, which begins on the July 10 will not lay the groundwork for a blockbuster recovery as the year progresses.


It has not been a walk in the park for corporate India in the first quarter of FY14. Now, brokerages are warning that the upcoming earnings season, which begins on the July 10, with IndusInd Bank's numbers, will not lay the groundwork for a blockbuster recovery as the year progresses reports CNBC-TV18’s Varinder Bansal and Arvind Sukumar.


Despite all that talk of taking steps to spur growth, boost investment, and get back on the high growth path, the UPA government may not have much to show as corporate earnings go. Experts say a depreciating rupee and global uncertainties have set the tone for a sluggish quarter to follow two consecutive quarters of near-zero growth.


Also read: Pin no hopes on Q1; shorting HUL was wrong: Raamdeo Agrawal


Raamdeo Agrawal, Joint MD, Motilal Oswal Fin Svcs says, there is not much to be expected from earnings. As far as aggregates are concerned, it is going to be muted like what happened in the last quarter.


Moreover, the gloom seems to be widespread. Even the brokerage firm JP Morgan believes that for most companies, sales growth will come in at a 3-year low. It also agrees with Kotak Institutional Equities, that aggregate earnings growth for Sensex companies will stand between 3 and 5 percent, against 19 percent a year ago.


Meanwhile, Bank of America-Merrill Lynch (BoFA-ML) pegs revenue growth at a 15-quarter low.


All the brokerages from CLSA to Morgan Stanley to JP Morgan, to Kotak blame the sharp 9 percent depreciation in the rupee seen over the period for this dismal outlook.


JP Morgan explains that over 40 percent of the aggregate debt for the Nifty companies is denominated in foreign currency, and so a weak rupee will inflate this amount substantially.

However, brokerages still point to a silver lining - they say one could see margins holding up in a few cases, indicating that cost pressures have eased.

First Published on Jul 5, 2013 10:33 pm
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