Net profit of Sensex companies are expected to grow by 4 per cent with banking sector dragging the overall earnings as the lenders are likely to make high provisions for bad loans, says a report.
According to the latest estimates by Kotak Institutional Equities, the profits in July-September quarter 2016 is expected to be led by industrials which is likely to see a 76.1 per cent growth followed by automobile sector at 43 per cent, compared to the same period year-ago.
Banking sector may be the hardest hit with its net earnings likely to drop by 15.2 per cent year-on-year. Excluding banks, BSE-30 companies (Sensex) earnings will rise by 9.8 per cent for the three months ended September.
“We expect net profit of the BSE-30 Index to grow 4 per cent year-on-year,” the report said.
“We see banking sector dragging overall earnings as companies in the sector are likely to make high provisions for bad loans,” it noted, adding that NBFCs may deliver stable trends in growth and profitability on quarter-on-quarter basis.
Besides banks, technology and utilities sector may also see marginal decline in their earnings.
Kotak has estimated growth in earnings for Telecom (23.8 per cent), pharmaceutical (15.3 per cent), metals and mining (8.5 per cent), consumers (5.9 per cent) and infrastructure (5.2 per cent).
As per the report, a strong quarter can be expected from Eicher Motors, Hero Motocorp, Maruti Suzuki, Tata Motors and TVS Motors, in the automobile sector.
Meanwhile, companies under Nifty-50 index are also likely to see a 7 per cent growth in earnings to Rs 697 billion, for the period under review, the report findings showed.