Earnings rebound

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: Corporate results for the quarter ended September will be keenly observed for signs of economic recovery. Some of the initial results show corporate India is on a rebound as sales are picking up on the back of lower interest rates, robust liquidity and pent up consumer demand.

The quarter ended September saw the Sensex logging its third consecutive quarterly gain. The emergence of markets like India and China as favourable investment destinations and the visible signs of global economic recovery have helped the capital markets. The average daily volumes sustained high levels at Rs 93,400 crore during the quarter.

Analysts say, unlike quarter ended June, when companies were reporting profits based on stake sales and operating efficiency, the quarter ended September will see growth in sales as advance tax paid by companies in the second quarter increased 15% year-on-year as compared with a decline of 4% in the first quarter of 2009-10.

Sectors like auto, cement and IT are expected to report stellar results and earnings divergence is expected in sectors like telecom, power and banking. The dampener would be the upward movement of both ferrous and non-ferrous metal prices, which will affect topline of metal companies. Oil and gas, pharmaceuticals and real estate are likely to report muted growth.

Sarabjit Kour Nangra, vice-president, research, Angel Broking says the benefit of low commodity prices and cost cutting measures will continue to play out during the quarter ended September, yielding better performance on the operating front. For 2QFY2010, Angel Broking expects Sensex companies to post a 6% growth on the topline aided by robust performance from cement, auto and IT sectors.

For Nifty companies, broking house Prabhudas Lilladhar expects revenue to dip 7.5% year-on-year as compared with 9% fall in the first quarter of this financial year. This, the broking house says, will be the third consecutive quarter of improving numbers for Nifty companies and the trend will get stronger in successive quarters.

Companies have discounted the impact of weak monsoon as low interest rate and adequate liquidity with banks are expected to ensure resurrection in consumption demand. Also, with various government schemes like NREGA and Bharat Nirman estimated to collectively put in circulation about Rs 85,000 crore in this fiscal, it would supplement income in rural income.