Dull consumer sentiment resulting from repeated hikes in interest rates are likely to play spoilsport for Indian companies as they unveil results for the the second quarter starting this week. The blow may be felt harder in the banking, automobile and real estate sectors.
Analysts said the recent rise in interest rates is expected to hit credit growth of banks and raise fears of bad debt. "We expect margins to remain flat sequentially and 16% rise in profit-after-tax for the large-caps," said Dilip Bhat, joint MD at brokerage Prabhudas Lilladher.
Real estate is likely to feel the maximum impact of the high-interest rate regime, leading to falling demand, a downward pressure on prices, high inventories on balance sheets and higher borrowing costs. With car loans getting costlier and fuel prices having been hiked, the automobile sector is also set to feel the pinch.
Listed realty players are likely to see a 10-15% fall in profits during the second quarter, while the automobile sector, which has seen a softening in demand and sluggish sales during the last couple of months, will not witness any dramatic improvement in profits, experts said. "There has been softening of demand (for auto) during the last two quarters," said Kapil Arora, partner, automotive practice, Ernst & Young.
The only silver lining appears to be the infotech sector. Moderate-to-strong growth is expected in revenues along with improvement in margins, all though a falling rupee could lead to some forex losses resulting from hedging operations to offset positions taken when the rupee was stronger.
"Tier 1 IT companies, such as TCS, Infosys, HCL Tech are likely to register growth close to 4.5 to 7%, while Tier 2 companies like MindTree and Mahindra Satyam will see a growth of about 5-6%. Wipro on the other hand will be growing at only 2%," said Srishti Anand, analyst, Angel Broking.