Hold on to equities, look for a rebound
earnings quarter after quarter. While much of it has been a fall out of the slowdown in the economy, all negativities have been factored in the net profit estimate right now. So any positive surprise on the earnings front will have an impact on the markets expectations and in its forecast for future. But even though the declining trend in profit growth may be nearing its bottom, experts feel that the time when earnings will surprise the analysts and which will trigger the earnings upgrade is still sometime away. "It will depend on interest rate cycle, government policy and investment cycle," said Dua.
In a recent report Kotak Securities also kept to the view that there are no signs of upgrade right now. The Kotak report slashed the earnings forecast for 2012-13 from 7.5 per cent at the start of Q2 FY'13 to 5.8 per cent now. "2Q FY'13 results provided no evidence of earnings upgrade. Net profits beat our estimates but largely due to higher other income in few cases and a large one off item in case of NTPC," said a report by Sanjeev Prasad of Kotak Securities.
The weakness in the corporate performance is also reflected in the revenue and profit expansion of the BSE 100 companies (excluding IOCL, BPCL and HPCL) over the last seven quarters. In the 21 month period, the net sales of these companies have grown by 33 per cent from Rs 4,03,006 crore in the quarter ended December 2010 to Rs 5,35,728
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