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Big bet on fourth-quarter show

Mumbai, April 10: Many brokerages expect Indian companies to brave rising commodity prices and maintain their growth momentum in revenues and profits in the fourth quarter.

A strong fourth quarter is good news for stock market investors who have been nervous over high oil prices and interest rates.

Industry will kick off its earnings seasons from April 15, starting with Infosys.

Though opinions vary among analysts, sectors such as oil and gas, IT, banking, capital goods and automobiles are expected to bring cheer to investors.

Telecom and real estate sectors are likely to disappoint.

The cement sector, which received a bearish outlook from a few analysts in the preceding quarters, is expected to do well over the January-March quarter.

The stock markets will also be watching the corporate outlook for the current fiscal.

All eyes are now on Infosys’s results, and what the company reveals about its outlook.

“As the market increasingly starts acknowledging and factoring in fiscal 2012 and fiscal 2013 earnings growth, in our view, the sensex will get a springboard for further upsides,’’ brokerage firm Angel Broking said in a report.

With demand reigning strong, the IT sector is expected to do well despite the quarter being a soft period.

Sharekhan is keen on Infosys’s guidance, which, according to the brokerage, will hold the key to stock market movements.

“For 2011-12, we expect Infosys to guide an 18-20 per cent revenue growth, which is slightly higher than Nasscom’s guidance of 16-18 per cent revenue growth for 2011-12. Any guidance lower than 18 per cent is likely to upset the street in the medium term,’’ it said.

The automobile sector is expected to continue its robust performance backed by a strong volume growth, though it may be impacted by a sharp rise in raw material costs. According to Kotak Institutional Equities, Tata Motors and Ashok Leyland may outperform their peers.

Car sales soared 30 per cent in 2010-11 — the highest in more than a decade — driven by strong economic growth, cheap loans and a slew of new models. In 2010-11, 1.98 million cars were sold compared with 1.53 million units a year ago.

The automobile industry as a whole reported 26.17 per cent growth in sales during 2010-11.

Banks are expected to perform well in the face of challenges posed by high inflation.

Analysts believe the banking sector can contribute to the overall earnings growth although the recent rate hikes from the central bank may impinge on its margins.

According to analysts at Motilal Oswal, banks may gain from higher loan growth and lower slippages in non-performing assets.

Net interest margins are likely to rise on an annual basis, but it may decline on a sequential basis.

Metal companies are likely to feel the pinch of high raw material costs on their margins at a time of rising prices.

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