Cement, telecom, capital goods to post higher growth: study

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Sectors such as telecom, capital goods (including power equipment), cement, construction, and non-banking financial institutions are expected to post highest revenue and earnings growth in the second quarter ended September 30, 2007 while others like automobiles, pharmaceuticals, metals will report lowest growth, according to a study.

At 18% Sensex return in second quarter of the current fiscal has been best in the last six quarters, softening interest rates, lower inflation, FII inflows, positive sentiment towards emerging markets all have contributed to the rise in these sectors, said market analyst Prabhudas & Lilladher in its latest earnings preview.

"We expect that earnings growth in the second quarter will not disappoint. Sectors like telecom, cement, construction are expected to report a solid 19% year-on-year growth in earnings and 10% y-o-y growth in revenues," the report said.

"While valuations are not cheap, we expect it to sustain with strong earnings report and we remain cautiously bullish from a 12-month perspective. Earnings and markets have weathered the period of rising interest rates, tightening money supply and choppy global markets," the report added.

The country is now in a period of topped-out interest rates, moderate inflation, continuing capex and steady consumer spending. This along with positive FII sentiment towards emerging markets should keep the domestic markets trending up over the medium-term. However, given the political uncertainty, high oil prices and increasing impact of global factors, a near-term-correction is not just possible but quite likely.