The signals are already here, and the actual bad news should start flowing soon. Financial results for the October-December, 2008 quarter are expected to show a fall in net profits for as many as 16 of the 30 companies that make up the benchmark sensitive index of the Bombay Stock Exchange.
Analysts expect state-owned giant NTPC, Mukesh Ambani’s Reliance Industries, cement maker ACC and ICICI bank among those showing a decline.
“Commodity prices are the biggest reason for a fall in earnings,” said Rajat Rajgarhia, Director-Research at Motilal Oswal Securities Ltd. Here is a look at how key sectors are likely to perform.
Banking would be among the few sectors that would report a substantial rise in net profits, on the back of robust treasury profits. Though the income of key banks as a whole would rise by around 26 per cent, the net profit margin would be lower as they would have made provisions to cushion bad loans.
The automobile sector is likely to report a net profit decline of 52 per cent due to falling car sales. Sales of auto makers are also expected to be down by around 18 per cent.
Metal producers are likely to show a net profit decline of 67 per cent. Margins of steel companies like JSW and SAIL would take a beating, while that of Tata Steel’s Indian operations would improve marginally due to its higher level of efficiency.
Real estate firms are expected to report a 40 per cent decline in net profit. Infrastructure companies are expected to see margins under pressure even in the fourth quarter ending March 31, 2009. The recent fall in commodity prices would likely to benefit these companies. In this backdrop, infrastructure companies are likely to bounce back in 2009-10 and report better margins.
Consumer spending is estimated to have slowed down, resulting in below-par sales growth for retailers.