Mumbai, Oct. 6: The impact of rupee depreciation will be in focus as India Inc gears up to declare its second-quarter results.
The 13-per-cent dip in the value of the rupee is expected to benefit sectors such as IT, metals and pharmaceuticals at a time other industries are likely to feel the pinch of the slowdown in the domestic economy.
Bangalore-based Infosys will kick off the results season on October 11.
The corporate scorecard is also crucial for the stock markets as there are many domestic and overseas factors that can impact investor sentiment.
The US government, already grappling with the shutdown, is staring at another crisis. The Congress must raise the country’s debt ceiling by October 17. Moreover, the US Federal Reserve is set to meet at the end of this month and is likely to taper its bond purchase programme.
Meanwhile, the Reserve Bank of India will announce its second-quarter monetary policy review on October 29, and analysts are divided on whether the policy rates will be hiked or left untouched.
“There are various headwinds such as the monetary policy, the developments in the US and five state elections that could affect the market sentiment. In such times, therefore, the earnings performance will play an important role,” an analyst from a foreign brokerage said.
Some top brokerages have indicated that the results season will offer a mixed bag. Certain export-oriented sectors are expected to salvage the overall performance.
“The depreciation of the rupee vis-à-vis the dollar is expected to boost profit after tax (PAT) growth of dollar-denominated sectors such as technology, healthcare and meta1,” a note from Motilal Oswal Financial Services stated. The brokerage added that its coverage of 140 companies would report aggregate PAT growth of 3 per cent year-on-year. This is an improvement of over 2 per cent negative growth seen in the preceding quarter.
Angel Broking also said in a report that the quarterly earnings performance was expected to be supported by IT and metal stocks and new private banks, while earnings of PSU banks and capital goods stocks are likely to weigh down on the overall performance. The brokerage expects the Sensex companies to report a 10.4 per cent growth in revenues over the same period last year.
Analysts said Infosys was likely to bring back cheer for investors by reporting a strong 12 per cent rise in net profit over the same period last year despite wage hikes. The performance is expected to benefit from the rupee fall, which is likely to push up margins coupled with a healthy volume growth and stable pricing.
The company is also expected to raise its revenue guidance of 6-10 per cent for this year.
Apart from IT, automobiles and metals are likely to deliver a good performance. Analysts maintain that the good show in the auto sector will be on account of Tata Motors, which will benefit from the strong performance by its subsidiary Jaguar Land Rover. Maruti Suzuki is also projected to post strong numbers because of last year’s low base owing to a strike at its facilities.