Markets set for damp quarter

‘Top-line growth likely to be lowest in a decade’; global concerns to hit IT sector
With companies all set to releaseresults for the first quarter of the current financial year, market participants appear to be unanimous in predicting a subdued quarter for most sectors. According to most brokerages, the overall slowdown that is affecting consumer demand will impact a numbers of sectors such as automobiles, fast moving consumer goods (FMCG) and consumer durables, while global concerns could see software majors getting affected. Further, analysts are pegging the overall top-line growth for the first quarter at single digits — a sharp moderation from the double digit growth in the last financial year. Banks, however, are expected to report healthy numbers on account of decent loan growth, better margins and lower provisioning amid a consistent fall in bad assets.
Driven by financials
“The Q1-FY20 earnings-report season will likely be a repeat of Q4-FY19, with financials driving the performance single-handedly,” stated Motilal Oswal Financial Services in its latest report.
“Corporate banks will account for the entire growth in the Nifty… autos will have
another lacklustre quarter. IT sector profit growth will come off in this quarter. Consumer sector is also expected to report a muted quarter,” it added. In a similar context, Edelweiss Securities is of the view that the first quarter would be a “soft quarter” with the profit of Nifty companies growing a meagre 7%. “What’s worrying is the sharp moderation in top-line growth to just 3% (18% in FY19 and 7% in Q4-FY19),” it said. It added that the top-line growth is likely to be the lowest in a decade if commodities are excluded. “What stands out is the slowdown’s breadth with even IT and industrial companies, which had posted mid-teen profit growth in FY19, likely to report mere 4% and 10% profit growth, respectively, in Q1-FY20,” it explained.

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