The optimism over Q3 earnings growth seems to defy logic for a country whose economic growth is at a decades low of about 4.6% during H1 of FY14. But the forecast arent a big surprise if we consider the surge in export earnings of IT, pharma, textile and auto firms and higher revenues from overseas arms. Bank of America-Merrill Lynch forecast Bharti earnings to grow 194% in Q3 while Tata Motors may post 106% growth aided by higher sales of its premium JLR brands, and TCS is likely to log a 47% growth taking advantage of the rupee depreciation. The picture is bleak for others with the countrys largest lender SBI forecast to record a 26% fall in earnings while capital goods major BHEL may see a 15% decline and Coal India may fall 10%.
Exclude the companies with high exports earnings and overseas revenues, JP Morgan says earnings of Sensex companies are likely to rise just 2% reflecting the stress in the domestic economy. The industry has failed to show any signs of growth during April-November, the services growth is moderating and the overall GDP is unlikely to grow faster than last years pace of 5%. Prime Minister Manmohan Singh as well as the BJPs PM candidate Narendra Modi all but agree that the economy may need 6 months to turn the corner, which imply the next two quarters may not be very rosy for India Inc. However, nothing can stop Indian MNCs from reaping the benefits of a global high tide.