The lower guidance given by Infosys at 8-10% as against Nasscom's 11-14% industry guidance spooked the markets on Friday, dragging down the BSE Sensex by 238 points to close at 17,095, but its impact outside the IT sector may be limited, say analysts.
"Even in the IT sector, Infosys has lost its leadership and the markets fell as they were expecting a 14-15% guidance. In fact, Cognizant will likely to give a guidance of 20%," said Deven Choksey, CEO and MD, KR Choksey Shares and Securities.
Infosys revenues for the January-March quarter at R8,852 crore, while up by 22% compared to same period a year ago, was down 5% when compared with the October-December quarter, sequentially. However, Infosys' tepid performance and guidance is unlikely to be mirrored on a wholesale basis across sectors.
A note prepared by Angel Broking says that it expects a 1 percentage point reduction in interest rates in the current financial year, while inflation levels are expected to come down by 1.5 percentage points.
"The reduction in interest servicing costs will have a pronounced positive effect on FY2013 earnings, especially for capital-intensive sectors, which have been battered by elevated interest burden for quite a while now," the note said.
For the auto sector, the note expects a 30% revenue and 25% net profit growth, with the strongest showing expected for Tata Motors due to strong sales of Jaguar and Land Rover.
In the banking sector, while the private sector banks will outperform the public sector banks in net interest income, overall, the banks are expected to report 21% growth in pre-provisioning profit for the January-March quarter, though asset quality remains an area of concern for the banking sector.
Concerns on profitability across industries, however, still remain. "The topline results of the different sectors need not be as bad as analysts are expecting but bottomline is going to be under pressure. We need a strong signal in reduction of interest rates because until that happens, don’t expect corporate profits to improve significantly," said CJ George, managing director, Geojit BNP Paribas Financial Services.