Oct 11, 2017 03:17 PM IST | Source: CNBC-TV18

Kotak’s Sanjeev Prasad expects muted Q2 earnings growth save for one sector

Kotak Institutional Equities’ Sanjeev Prasad sees oil and gas to have a fantastic quarter and refining margins could be at 10-11 dollars per barrel.

Equities have witnessed a solid rally over the past year amid expectations of an earnings rebound led by an economic revival -- both of which have remained elusive.

But as the street heads into another earnings quarter, one that could make or break the market, Kotak Institutional Equities is not overly optimistic.

“This is not going to be a great quarter. We are looking at 8 percent growth in overall numbers,” Sanjeev Prasad, Managing Director, Co-head, Kotak Institutional Equities told CNBC-TV18 in an interview.

An EPS growth of 8 percent would not please the market given that it is pencilling in double-digit earnings growth for the full year.

What's worse? Prasad expects growth only to come from the oil and gas space.

“The sector will witness fantastic numbers. Strong refining margins of 10-11 dollars per barrel are seen,” he told the channel, adding that rest of the sectors may not paint a very pretty picture. "In case of automobiles, volumes are good, but margin compression is a challenge."

In the oil and gas space, Prasad expects Reliance Industries to see "complicated earnings" due to the telecom impact. “Core chemical refining will be very strong and its refining margins are set to be strong. Having said that, telecom could pull down the numbers,” Prasad said.

In the telecom space, he foresees a bad quarter. In fact, the December quarter could be bad as well given the changes in interconnect usage charge (IUC).

For non-banking financial companies (NBFCs), he expects strong numbers, especially the retail-ending ones. So, the likes of Bajaj Finance, Cholamandalam Investments, and M&M Finance could see good numbers, he said.
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