Mumbai, July 8: Brokerages are wary of the first-quarter earnings season, which begins this week.

Capital goods, telecommunication and cement companies along with some banks are expected to post good results. Most of the other sectors are likely to report modest to disappointing numbers.

Bharti Airtel, Reliance Communications, Larsen & Toubro and Bhel are expected to delight investors.

According to the brokerages, rupee appreciation, lower demand and higher input and interest costs can bother India Inc during the quarter. They expect most automobile, IT service, metal and textile companies to post disappointing numbers.

Last Friday, the sensex breached the 15,000-mark. Broking circles, however, feel that the market trend in the short term will be determined by quarterly results, the first of which will be announced by Infosys Technologies on July 11.

A report from Merrill Lynch titled A Reality Check sums up the mood among the brokerages.

The report says, “We expect the sensex earnings growth for the June quarter at 19 per cent year-on-year. This represents a substantial slowdown versus the over 30 per cent growth in the four quarters of 2006-07… We believe the slowing earnings could act as a trigger for the markets to correct, especially if earnings (of companies) do not provide an upward surprise.”

A few sectors may see a correction in earnings. Leading the pack are software services and automobiles. Here, rupee appreciation, higher visa and wage costs are seen to affect performance despite a strong demand. The surge in the rupee’s value is also likely to hurt textiles.

Though some analysts fear a sequential decline in the earning per share of Infosys and TCS, the key will be the guidance issued by Infosys. It is, however, felt that the guidance will not be too encouraging.

The automobile sector faces the problem of lower demand because of high interest rates. This is because a large portion of sales is accounted by bank finance.

Two wheelers are likely to be the worst hit vis-à-vis four-wheelers. Though some expect lower to stagnant profits from Tata Motors and Ashok Leyland, their condition will be better than Bajaj Auto and TVS Motors.

While metals could disappoint with aluminium companies taking the knock, Tata Steel could be an exception.

However, there are a few encouraging trends. Capital goods firms are expected to reap the benefit of robust order books. Telecommunication companies will benefit from better long distance business.

Cement firms could surprise investors despite worries over the impact of government intervention. Though growth rates may moderate in the quarter, the firms’ bottomlines will continue to look up.

While heavyweights such as Reliance Industries Ltd are likely to forecast strong numbers, banks will see a mixed bag with private sector entities faring better than their nationalised counterparts.