Mumbai: For stocks worldwide, it may be time to worry about the upcoming earnings season. But there’s one place where profit estimates are surging: India.
The fundamentals of corporate India are improving, and the average analyst projection for next year’s earnings at S&P BSE Sensex Index companies has jumped to a record high — not just in rupee terms, but also in US dollars. That’s a stark contrast with members of the MSCI All-Country World Index and MSCI Emerging Markets Index, which have seen steady declines in estimates.
“We expect the earnings recovery momentum to continue this quarter as well with aggregate earnings growth expected in mid-double digits,” said Jyoti Vaswani, the Mumbai-based chief investment officer at Future Generali India Life Insurance Co. overseeing 40 billion rupees ($570 million) in assets.
She expects corporate banks to report a significant recovery in earnings, while retail banks are expected to continue with their steady performance.
Screenshot: Bloomberg Screenshot: Bloomberg
The beginning of the earnings recovery may be apparent in results for the final quarter of the last financial year, ended March 31, particularly when it comes to banks. With financials accounting for more than a third of the Sensex, good results for the sector could help boost the nation’s stock market. A pickup in credit demand and a recovery in loans is helping the firms now, after a mountain of bad debt — especially at state-run banks — dented profitability last year and took the market down 14 per cent from a peak.
“We expect earnings to grow at 15 per cent to 20 per cent and that should drive markets higher, bringing in foreign investors,” Vaswani said. “With this, domestic investors, too, should start coming back.”
For the three months ended March 31, profit at NSE Nifty 50 Index members increased 15 per cent, almost double the 8 per cent pace a year earlier, Motilal Oswal Securities Ltd. estimates. JM Financial Ltd. sees earnings-per-share up 17 per cent, buoyed by financials and health-care companies, even as telecoms and autos remained a drag.
Asia’s second-largest software exporter, Infosys Ltd., kicks off the quarterly earnings season in India on Friday. Here’s what some analysts expect: