Hopes for a broad-based corporate recovery have sprung anew with strong advance tax collections and rise in domestic demand. The market is expecting a strong result for the second quarter, ended September 2009.
“Factors like picking up of indirect taxes, companies increasing salaries and advance tax numbers are indicating that industrial activity has picked and I expect a good result for the second quarter,” said Anup Bagchi, executive director, ICICI Securities.
“Auto, cement, banking, capital goods and FMCG sectors are likely to report sales growth and a margin expansion is expected on a sequential basis,” said Aseem Dhru, CEO, HDFC Securities.
The quarter results will kick start in a big way in the next couple of days as Reliance Industries and Infosys will announce their results on Wednesday and Friday, respectively.
Reliance and Infosys (having the highest weightage in Sensex of 13.5 per cent and 9.1 per cent, respectively) will give some structure to result expectations but market players expect better surprise in the second half of current fiscal as huge latent domestic demand unleash through the broader economy.
While expansion in margins is expected, but growth in September over June is not likely to surpass the growth in June over March 2009.
“Year on year growth for third quarter would be strong because of the bad results in the third quarter last year,” said Amitabh Chakraborty, president - equities, Religare Enterprises. “There would be positive surprise in the next quarter,” said Dhru.
While the domestic demand story has played well for certain sectors, there are others that would suffer because of the commodity cycle
“Metal and realty companies are likely to perform bad as the metal prices have softened and demand in the real estate has been weak,” said Gaurav Dua, head of research, Sharekhan.
The market gained strength in July after the advance tax numbers came to markets know-how. “We may see a substantial growth in topline and bottomline,” said Alex Mathews, head of research, Geojit Securities. “The advance tax numbers for companies such as Reliance Industries, Mahindra &Mahindra, Maruti Suzuki, State Bank of India and ICICI Bank are very encouraging.”
Results for the quarter hold significance as markets witnessed weak results in the past three quarters and analysts expected some stability on result growth in September 2009.