Hold on to equities, look for a rebound
"In Q1 and Q2 this year the revenue growth momentum has slowed down but the margin pressure is also easing." Companies have been working hard to bring down their expenditure in order to reduce the pressure on margins. For Sensex firms, year-on-year growth rate of total expenses has also come down from 30 per cent in September 2011 to 13.2 per cent in September 2012. While a softening of the commodity prices is helping their cause, firms have also brought down the growth rate in expenditure on salary and wages, as well as the pressure on account of interest expenditure.
There are others who agree with this view and say that earnings should witness a pick-up in a quarter or two. "I think the downtrend is bottoming out and in a quarter or two it should come up," said Pankaj Pandey, head of research at ICICIdirect. "Statistically, infrastructure companies are at low base, metal prices have come down, banks have high provisioning and statistically it will not go up and on top of it a rate cut will help the companies significantly." Crisil research too is of the view that the downward trend in gross earnings Ebitda is bottoming out. "Ebitda has bottomed out and is primarily driven by softening of commodity prices and weak rupee continuing to support the export oriented sectors," said Mukesh Agarwal, president, Crisil Research.
Earning upgrade still some time away
Most experts are of the view that over the last 18 months, analysts have downgraded
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