Realty giant DLF and gains from merger and acquisitions by Indian blue-chip firms will help boost the earnings growth of Sensex companies to 33 per cent this fiscal, according to global financial major Citigroup.
Citigroup Global Markets, the brokerage and equity research arm of Citigroup, on Thursday said in a report that it was revising upward the Sensex earnings growth forecast for FY07-08 ending March 2008, to 33 per cent, from 22 per cent previously.
Citigroup said that the revision was primarily due to the inclusion of DLF into the Sensex and gains in consolidated earnings from M&A deals executed by the index companies.
DLF replaced Dr Reddy's Labs in the 30-share benchmark index on November 19, while a number of companies from this blue-chip index have completed mergers and acquisitions in the recent past, including Tata Steel's multi-billion dollar takeover of world's sixth largest steelmaker Corus.
In the July-September quarter, the second quarter for this fiscal, saw the cumulative earnings of Sensex companies growing by 28.9 per cent against a 17.7 per cent forecast, Citigroup said, adding this better-than-expected performance had also led to upward revision of full-year estimates.
It said that DLF was expected to report earnings growth of 218 per cent in FY08 and another 43 per cent in FY09. "DLF is a significant contributor to Sensex earnings growth for FY08 (15.7 per cent) and FY09 (12.9 per cent)," Citigroup said. DLF is the first real estate company to make way to the Sensex.
In the revised FY08 estimates, metals and mining sector would contribute 16.8 per cent to the Sensex earnings growth, up from a negative contribution of 0.9 per cent in previous estimates.