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Q2: India Inc set for tepid growth

business Updated: Oct 11, 2010 02:13 IST
Sandeep Singh

The country's economy may have been projected to grow at 9.7 per cent in 2010 by the International Monetary Fund (IMF), but experts are not holding out high hopes for India Inc's corporate results for July-September 2010, which are expected to begin trickling in this week.

"The results would largely be in line with what we had in the first quarter and we are expecting a 10-12 per cent earnings growth year on year for Sensex companies," said Aseem Dhru, CEO, HDFC Securities.

Enam Securities has projected a year-on-year revenue growth of 23 per cent for Sensex companies but expects the profit growth at only 13 per cent.

Experts feel that the industry is still reeling under the pressures of high input and increased wage cost, even if the revenues show healthy growth.

"Despite stronger year-on-year growth in revenues, Indian companies are likely to face pressure on their bottom line owing to rising input cost and higher provisioning costs (Banks) that will be reflected in the tepid margins in Q2," said an ICICI Direct research report.

As the demand has been rising the companies in the auto, capital goods, banking and oil and gas are expected to pose strong revenue growth but the profit growth will remain weak.

"On the margins front, we expect the auto, cement and FMCG sector to witness highest margin pressure owing to a rise in input costs," the ICICI Direct research report said.

Experts do not see a run in the stock price movement on account of the result outcome, as they feel share prices have moved ahead of their fundamentals over the past month-and-a-half. The Sensex, which closed at 20,250 on Friday, has seen gains of over 2,280 points or about 12.7 per cent since September 1, touching 32-month highs on the way.

"It is unlikely that the earning can surprise us on the positive side and all the news is in the price, however the risk of a negative surprise from companies on earnings front remains," said Dhru.