India is going to enter double digit earnings growth after a long time: IIFL

After India Inc posted better than expected returns in the second quarter, Abhimanyu Sofat of IIFL says that the earnings momentum is likely to be better in the coming quarters.

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Private lenders, IndusInd Bank and Yes Bank, are set to become a part of the BSE Sensex 30 on December 18, increasing the weight of financial stocks in the benchmark index to over 42%. (Reuters)

After India Inc posted better than expected returns in the second quarter, Abhimanyu Sofat of IIFL says that the earnings momentum is likely to be better in the coming quarters. In an interview to ET Now, Abhimanyu Sofat ,VP- Research, IIFL said, “After a long time, we are going to hit double digit earnings growth. We look quite optimistic about the future in terms of earning momentum where the consumer cycle also improves with the shift from the unorganised to organised as well.”

The expert points out that a lot of companies’ profits were had taken a hit after demonetisation last year. “Post demonetisation, margins had taken a hit with lots of losses for companies across sectors. There is likely to be an expansion in the margins going forward and with the capex cycle showing early signs of reviving, earnings growth should come probably this year,” Abhimanyu Sofat explained.

Taking stock of earnings reported by India Inc in the quarter gone by, research firm Motilal Oswal says that it was a ‘breath of fresh air,’ as most of the corporates have beaten street estimates. In an interview to CNBC TV18, Gautam Duggad of Motilal Oswal Securities said, “The earnings have come as breath of fresh air and one can look forward to better earnings due to base effect and disruptions behind us.”  On similar lines, Jonathan Garner of Morgan Stanley said, “We are cyclically at the beginning of an upswing in activity and in credit growth and therefore in corporate earnings. So look at corporate earnings growth. We should be getting at least high teens year-on-year (Y-o-Y) earnings growth for the next two years running.”

While many market experts say that there could be rebound in the pharma sector, Abhimanyu Sofat said that concerns regarding pricing continue to loom in the space. The basic concern with the overall pharmaceutical sector has been what is happening in the US in terms of pricing and we still are not seeing any signs of abatement of reduction of pricing on the generic side,” he said in the same interview.

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