IT biggies — Infosys and TCS — will kick off March quarter earnings season on April 12. Deutsche Bank expects Q4 to be a muted quarter for largecap Nifty earnings growth.
Aggregate revenue, EBITDA and net income are expected to increase 4 percent, 4 percent and 6 percent (YoY), respectively, for Nifty companies, according to the global brokerage.
Deutsche expects financials and IT services to deliver relatively higher earnings growth.
"We expect Nifty financials to report a robust increase in net income (430 percent YoY). The result should be aided by strong loan growth, improving NIMs and lower slippages, besides the supportive base effect," it said.
NBFC development has also been favourable for banks, helping growth and pricing power incrementally, it added.
"We expect Nifty banks to report relatively higher quarterly earnings growth - SBI, Axis Bank and ICICI Bank."
Indian IT Services companies have been reporting a relatively better demand environment over the last few quarters and INR depreciation has also been supportive.
During the Jan-March 2019 quarter, however, rupee appreciated 2.2 percent QoQ (average) versus USD and is an incremental headwind, Deutsche said, compared to last year Q4FY18, rupee is lower by 9 percent YoY should aid Nifty IT Services quarterly earnings growth of 19 percent YoY.
Wipro, TCS and HCL Technologies are likely to report relatively higher growth, according to the brokerage house.
Among other sectors, Deutsche expects Nifty materials' net income to decline 60 percent YoY led by metal companies while cement companies are expected to report relatively higher growth aided by lower costs and higher realisations.
Among Nifty materials, UltraTech Cement & Grasim may report strong earnings growth.
In consumer discretionary space, the brokerage expects Nifty companies' aggregate EBITDA and net income to decline 14 percent and 21 percent YoY, respectively. The decline could be led by auto companies due to weak sales momentum and pricing pressure.
Auto sector has been underperforming for many months now with Nifty Auto index losing more than 24 percent in last one year. The industry overall has been reeling under macro economic challenges on the back of liquidity crunch, rise in interest rate and total cost of ownership.
But non-auto consumer discretionary companies like Titan and Zee Entertainment are expected to report relatively stronger growth, Deutsche said.
It cut Nifty consensus earnings estimates for current fiscal (FY19) by 4 percent over the last quarter, and said earnings revision breadth is continuing to be negative. "Only 15 of Nifty 50 companies saw increased current fiscal earnings estimates over the last quarter."
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