The approaching results season could see a shift in investor preferences across sectors as a few of the sectors that drove the four-year bull run could see a slowdown.
Analysts expect market drivers of the past like information technology and automobile companies to show a lower rate of growth in the first quarter. While higher input costs and competition could dent the profits of automobile firms, a stronger rupee is expected to have the same effect on infotech firms.
Though the appreciation of the rupee could dent the infotech profit margins by up to 4 per cent, the extent of damage would depend on the offshore business of these companies and their hedging strategies.
Despite the higher cost of funds and reserve requirements, banks are expected to clock higher net interest margins. “The cost of funds for banks went up during the previous quarter. However, on the back of higher lending rates, banks are expected to see a slight improvement in net interest margins,” said A Balasubramanian, chief investment officer of Birla Mutual Fund.
A recent report on the Indian steel industry says that the shortfall in supply is likely to continue till 2008-09. With demand firm despite higher prices, steel companies are expected to carry forward the momentum during the current quarter. “However, results of companies producing non-ferrous metals could be a mixed bag due to volatility in prices,” said a broker on the Bombay Stock Exchange.
In oil, refining companies could put up a better show than those in oil exploration. “The rise in the rupee has helped refining companies, while putting a strain on the realisations of exploration companies,” said Deepak Jasani, head of retail research at HDFC Securities.
Engineering and capital goods companies ended 2006-07 with bulky order books. Analysts said the trend continues, helping them notch up good numbers in the current quarter.