The robust numbers reported in the March quarter are likely to be repeated in the first quarter of this fiscal, and brokerages expect the Sensex companies to clock an annual growth of over 22 per cent in the current earnings season beginning this week.
"The adjusted earnings of the Sensex companies are expected to grow by a strong 22.5 percent y-o-y in the Q1. The Sensex earnings (ex-oil firms) are estimated to grow by 25.8 per cent y-o-y," brokerage Sharekhan said in its earning note.
Analysts say growth in the earnings of the Sensex firms would mainly be achieved on the back of a relatively better performance of metals (owing to improved realisations and volume growth) and capital goods sectors. But the telecom and cement sectors are likely to be a drag the Sensex, they add.
"We expect the Sensex universe to report sales growth of 28 per cent and profit growth of 19 per cent. Growth in earnings are expected to improve over the next three quarters with an average growth of 22 per cent," Motilal Oswal said in its note.
Motilal Oswal, RIL is expected to report a strong earning growth of 30 per cent, while ONGC may report de-growth of 28 per cent. Also, a muted numbers of 3 and 6 per cent, respectively by NTPC and SBI, will bring the overall earnings growth down, it said, adding RCom, ONGC and Bharti Airtel will report de-growth of 82, 28and 21 per cent, respectively.
Prabhudas Lilladher estimates that "for the Nifty pack, revenue and PAT are expected to grow by a solid 30.4 per cent and 37.2 per cent y-o-y, respectively. However, brokerages also fear the current quarterly growth is a near-term peak as the base effect starts wearing off from the second quarter.
On sectoral growth, a brokerage said growth is expected to be robust for sectors like retail, hospitality, media and auto, while cement and telecom are expected to decline.
Though yearly growth is likely to be strong for commodity-driven sectors (oil & gas and metals), recent downgrades in earnings estimates for metal companies (on the back of rising global uncertainties) pose risks to the earnings outlook, says Edelweiss.
In its outlook for the IT sector, Emkay expects a revenue growth in the range of 3-5 per cent in dollar terms, with Infosys expected to clock the highest at 5 percent. But Edelweiss sees Infosys surpassing its revenue guidance of 2.6-3.4 per cent q-o-q growth, despite the currency impact.
On earning impact for markets, Motilal says, "accelerating economic and corporate profit growth will limit downside in the market. At the same time, above-average valuations cap the upside". The brokerage house expects benchmark indices to remain with a range of 10 per cent from the current levels.
"Indian markets had a lackluster first half of 2010, rising just 1-2 per cent. However, just like the ongoing Football World Cup, Indian equities could throw up a few surprises in the second half of the year," it added.