Just as we thought we were done analyzing the results for the quarter ended March 2010, another result season is upon us. The pace will be set by Infosys, which will announce its June quarter ended results on Tuesday. What Infosys will also do is set the tone for the markets and its expectations from corporate India for the quarter.
What the markets are seemingly expecting currently is a strong performance from Indian companies. This is given a strong rebound in earnings growth during the last quarter, which ended in March. As such, any letdown on that front might come as a serious setback for investor sentiment.
However, there are several reasons to cheer for the market currently. Key amongst them is a good monsoon, recovery in industrial growth and consumption, and a rebound in global markets. Just last week we saw global markets recording their best weekly performance in almost a year. This was on the back of reports that US retail sales grew at the fastest pace in four years and the IMF raised its forecast for global economic growth.
Anyways, talking about India alone, apart from the positives as mentioned above, the markets are also awaiting more cues from the RBI on its interest rate stance. The bank had recently upped its benchmark rates. It did so with a view to tackle the inflation problem in a timely manner. Given that good monsoons are likely to come to RBI's aid (by leading to higher crop production and therefore higher supply), markets are seemingly breathing a sigh of relief on the interest rate front.
Well, let's talk about corporate India in general and some sectors in particular. The IT sector is showing improved signs of recovery although margins are likely to come under pressure during the June quarter. This is owing to the general practice of IT companies to raise employee salaries during the quarter. On the business front, volumes are seen picking up. Companies have also seen some billing rate stability. Given all this, it will be interesting to see how the managements of leading IT companies see the next few quarters evolving.
Among interest rate sensitive sectors, the automobile sector is having the best of times. This is given a sharp pick-up in demand for both 2 and 4-wheelers. Commercial vehicle sales have also gained steam. And not to forget a revival in exports! Companies are also likely to benefit from decline in commodity prices that will ease some pressure from their margins.
As for the real estate sector, the demand is improving as well, but the pace is very slow. This is given the fact that realty prices have risen back to their pre-crisis levels, fast than then improvement in demand for both residential and commercial properties. Realty companies are seen coming back to their days of greed.
We will talk about some other sectors in our subsequent articles. As of now, things are looking somewhat brighter for Indian companies. Amidst this though, any bad news from Europe or the US can spell trouble for Indian markets.