Mixed results expectation
India Inc is expected to report a mixed set of numbers for the fourth quarter ended March 2019.
Sectors such as metals and automobiles are likely to disappoint, while IT services are expected to put up a modest show. Consumer goods, engineering and cement are expected to shine.
The surprise may come from the banking segment, with lenders improving their performance over the year-ago period.
IT services majors Infosys and Tata Consultancy Services (TCS) will both report their quarterly numbers on Thursday.
The January-March period is seasonally not a strong period for companies in this sector. Brokerages feel the appreciation of the rupee against the dollar will lead to a fall in margins.
Analysts, however, are projecting Infosys and TCS to post a revenue growth of around 2.5 per cent in dollars on a sequential basis.
They expect the period to be marked by good deal momentum, particularly in digital services.
The focus will be again on guidance, particularly from the banking, financial services and insurance (BFSI) vertical. The analysts expect Infosys to guide for an 8-10 per cent constant currency growth for this fiscal.
Infosys had upped the revenue guidance to 8.5-9 per cent for 2018-19 from 6-8 per cent earlier.
“Benefits from strong deal flow and increasing digital deal sizes will be offset to some extent by slower spending growth in budgets in 2019-20. Banking is the largest vertical for IT companies. At a broader level, spending growth will be slower than the calendar year 2018,” analysts at Kotak Institutional Equities said in a note.
They expect TCS to report a net profit of Rs 7,949 crore, a growth of around 15 per cent over the corresponding period last year.
For the investor, the results come at a time key indices are hovering near record highs on strong portfolio inflows amid expectations of the current government coming back to power with stable numbers. However, a few observers feel that equities could witness some volatility as the campaign picks up momentum.
The earnings calendar could spring some pleasant surprises. Experts feel the banking sector could post better numbers because of a low base. There could be some good news on asset quality in terms of recovery of bad loans and lower slippages.
“The base is very low because of significant provisions and clean-up exercises undertaken by banks in the fourth quarter of 2017-18. We expect the sector to report healthy operating metrics and profitability to grow sequentially,” analysts at Reliance Securities said.