Hoping for earning boost? Prepare for anticlimax, says Citi
Brokerage house Citi has said that the market is rising faster than the pace of corporate earnings, and those hoping for an upgrade in earnings estimates could be in for a disappointment.
January 09, 2013 / 15:56 IST
Moneycontrol Bureau
Brokerage house Citi has said that the market is rising faster than the pace of corporate earnings, and those hoping for an upgrade in earnings estimates could be in for a disappointment. For the December quarter, Citi is penciling in a 7.5 percent aggregate growth in earnings of Sensex companies, excluding state-run oil companies.
Excerpts from the Citi report:"Earnings growth (in Q3) will be lower than the prior 2 quarters (average 11 percent), sales growth should slip to single digit (8 percent), and margins will dip. While earnings growth band is not dissimilar to the last 4 quarters, the rising chorus of earnings upgrade expectations will sound flat, this quarter at least."Which is better? Domestic cyclicals or defensives?"The market seems to be gearing itself for earnings upgrades in domestic cyclicals, but their growth is actually moderating (excluding banks). While defensives seem to be largely holding onto growth rates, FX sensitives are seeing a surprising moderation in growth."No solid reasons for earnings upgrades"India's earnings revisions are actually doing better than EM’s; the pace of downgrades has reduced more. However, we believe rising expectations of upgrades are a reflection of the market rather than any upswings in the economic/operating environment yet (and over the next few quarters), and could be a disappointment up ahead."Also Read: Equities to beat fixed income; buy gold ETFs: Axis Direct Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
