New Delhi: Banks and consumer companies are expected to step up first quarter earnings India has been boosted by a pick-up in economic activity, falling input costs and lowest bad loans in a decade for lenders, while prospects for the country’s software exporters remain bleak due to global headwinds.
India’s banking industry has been largely insulated from the global crisis due to its heavy reliance on local markets. Meanwhile, the country’s consumer and capital goods companies are expected to benefit from commodity prices that are at heights seen after Russia’s invasion of Ukraine.
Varun Sabu, Mumbai-based head of equities at Anand Rathi Share & Stock Brokers Ltd, said, “Across all industries, we are seeing a rapid reduction in costs, so this will impact earnings.” Sabu forecasts an income growth of 15%. For companies in the benchmark NSE Nifty 50 Index. Asia’s top software services exporter Tata Consultancy Services Ltd will kick off the first quarter earnings session for Indian companies on Wednesday.
conglomerate Reliance Industries LimitedThe company, which has a 10th weighting in the Nifty 50 index, is expected to boost its operating profit in the June quarter on strong performance in the oil-to-chemicals and digital services sectors, according to analyst estimates compiled by Bloomberg.
banking boom
The bad loan ratio in Indian banks stood at a decade low of 3.9% at the end of March 2023, the Reserve Bank of India said in its Financial Stability Report. It expects the ratio to fall to 3.6% by March 2024.
Top four private sector lenders in Nifty 50 index – HDFC bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank – may see quarterly profit growth of between 18% and 38%. Their net interest margin is estimated to be above or around 4%, the highest in Asia. State Bank of India, the country’s top lender by assets, will more than double its quarterly profit, according to estimates compiled by Bloomberg.
The rise in central bank interest rates has also led to an increase in the lending margins of local lenders. A possible revaluation of deposits may reduce some margins, though the impact will be limited until the central bank starts cutting rates.
Rajesh Cheruvu, chief investment officer at Liechtenstein royalty-backed LGT Wealth India, expects net interest margin for the sector to shrink by around 30 basis points until the key rate comes down, which is not expected until at least the end of September , according to a Bloomberg survey. Margins and return on assets remain at “very good” levels, Cheruvu said.
consumption drive
Relieving cost pressures from falling energy and material prices as well as improving supply chains following the easing of Covid-related restrictions are likely to help consumer, capital goods and cement companies improve earnings, while volumes The increase is expected to continue.
According to Ajay Thakur, consumer-sector analyst at Anand Rathi, lower crude oil prices will benefit paint makers’ earnings and fall in palm oil prices will help manufacturers of soaps, detergents and packaged foods.
Higher retail prices of gasoline and diesel will help refiners’ margins, India’s top three oil marketing companies Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are expected to boost earnings.
technical difficulties
The government-mediated relief package by UBS Group AG to crisis-hit Credit Suisse Group AG and the collapse of two medium-sized US banks earlier this year raised fears of unrest in the global banking industry, which may have led many financial companies to exercise their discretionary powers. was forced to make cuts. Expenditure on information technology services.
India’s $245 billion technology sector, in which banks are a major contributor, may face pressure from pricing, winning large deals and margins. The big four software services exporters — Tata Consultancy Services Ltd., Infosys Ltd., HCL Technologies Ltd. and Wipro Ltd. — derive more than a quarter of their revenue from the financial sector.
Analysts at Jefferies and BNP Paribas wrote in separate notes that higher wages could impact margins as well. But some believe that the determination of risks lies in the assessment. The NSE Nifty IT index is currently trading at less than 24x earnings, down from a record high of around 39x earnings at the start of 2022.
Siddarth Bhamre, head of research, Religare Broking Ltd, said, “It has been one and a half years since the market buzzed about this fear of recession and fear of spending cuts.” “For me, IT is available at reasonable valuations. . ,
India’s banking industry has been largely insulated from the global crisis due to its heavy reliance on local markets. Meanwhile, the country’s consumer and capital goods companies are expected to benefit from commodity prices that are at heights seen after Russia’s invasion of Ukraine.
Varun Sabu, Mumbai-based head of equities at Anand Rathi Share & Stock Brokers Ltd, said, “Across all industries, we are seeing a rapid reduction in costs, so this will impact earnings.” Sabu forecasts an income growth of 15%. For companies in the benchmark NSE Nifty 50 Index. Asia’s top software services exporter Tata Consultancy Services Ltd will kick off the first quarter earnings session for Indian companies on Wednesday.
conglomerate Reliance Industries LimitedThe company, which has a 10th weighting in the Nifty 50 index, is expected to boost its operating profit in the June quarter on strong performance in the oil-to-chemicals and digital services sectors, according to analyst estimates compiled by Bloomberg.
banking boom
The bad loan ratio in Indian banks stood at a decade low of 3.9% at the end of March 2023, the Reserve Bank of India said in its Financial Stability Report. It expects the ratio to fall to 3.6% by March 2024.
Top four private sector lenders in Nifty 50 index – HDFC bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank – may see quarterly profit growth of between 18% and 38%. Their net interest margin is estimated to be above or around 4%, the highest in Asia. State Bank of India, the country’s top lender by assets, will more than double its quarterly profit, according to estimates compiled by Bloomberg.
The rise in central bank interest rates has also led to an increase in the lending margins of local lenders. A possible revaluation of deposits may reduce some margins, though the impact will be limited until the central bank starts cutting rates.
Rajesh Cheruvu, chief investment officer at Liechtenstein royalty-backed LGT Wealth India, expects net interest margin for the sector to shrink by around 30 basis points until the key rate comes down, which is not expected until at least the end of September , according to a Bloomberg survey. Margins and return on assets remain at “very good” levels, Cheruvu said.
consumption drive
Relieving cost pressures from falling energy and material prices as well as improving supply chains following the easing of Covid-related restrictions are likely to help consumer, capital goods and cement companies improve earnings, while volumes The increase is expected to continue.
According to Ajay Thakur, consumer-sector analyst at Anand Rathi, lower crude oil prices will benefit paint makers’ earnings and fall in palm oil prices will help manufacturers of soaps, detergents and packaged foods.
Higher retail prices of gasoline and diesel will help refiners’ margins, India’s top three oil marketing companies Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are expected to boost earnings.
technical difficulties
The government-mediated relief package by UBS Group AG to crisis-hit Credit Suisse Group AG and the collapse of two medium-sized US banks earlier this year raised fears of unrest in the global banking industry, which may have led many financial companies to exercise their discretionary powers. was forced to make cuts. Expenditure on information technology services.
India’s $245 billion technology sector, in which banks are a major contributor, may face pressure from pricing, winning large deals and margins. The big four software services exporters — Tata Consultancy Services Ltd., Infosys Ltd., HCL Technologies Ltd. and Wipro Ltd. — derive more than a quarter of their revenue from the financial sector.
Analysts at Jefferies and BNP Paribas wrote in separate notes that higher wages could impact margins as well. But some believe that the determination of risks lies in the assessment. The NSE Nifty IT index is currently trading at less than 24x earnings, down from a record high of around 39x earnings at the start of 2022.
Siddarth Bhamre, head of research, Religare Broking Ltd, said, “It has been one and a half years since the market buzzed about this fear of recession and fear of spending cuts.” “For me, IT is available at reasonable valuations. . ,