Consumers could still be the trend setters
The FMCG stocks are likely to remain in the limelight. In the last quarter, they were one of the big beneficiaries of the tax cuts since most of these FMCG companies are in the higher tax bracket. Top-line growth may continue to remain muted but the growth in profits could still be visible. The sharp spike in oil prices happened towards the end of December, and hence, may not really impact the profits of FMCG companies.
Banking could have some real worries this time around
There could be some positive in this quarter from partial NCLT flows for large banks but the real problem could come from NPAs. With the SEBI deadline for reporting of NPA accounts fast approaching, a large number of companies including Suzlon, DHFL and ADAG group are making a clean disclosure of their bad loans. That is likely to hit the banks across the board since these are loans that the PSU banks and the private banks are exposed to. Then there are other bankruptcies like Jet, IL&FS, DHFL, Cox & Kings, Café Coffee Day, etc., which need to be written off. You can expect banking stocks to be under pressure this quarter.
Likely to be a tricky quarter for commodities
Most commodities are likely to have a fairly tricky quarter. Upstream oil companies are likely to be under pressure due to weak oil prices till the end of December. Downstream oil is likely to see flat GRMs on the refining front but see lower uptick from inventory valuation. OMCs may be making some provision for subsidies as crude prices have gone up sharply after the tensions in the Middle East. The base metals could be a lot more interesting.
The demand for aluminium and copper is largely dependent on Chinese demand and that has been helped by the stimulus. We could see most of these minerals companies reporting better than expected results. However, problems for the steel industry continue due to a sustained slowdown in demand and sustained dumping of steel by China.
IT and Pharma could be a quarter of hope
There is hope that both IT and pharma could do well in the coming quarter. Infosys has raised its guidance by 50-100 basis points on revenue growth and that is likely to be helped along the way by a weak rupee. The weak rupee may also induce the IT companies to give a more aggressive guidance for the coming year. On the pharma front, the domestic market is again expected to do better than the US markets and that is likely to benefit the pharma companies with larger India market share.
Capital goods could have some worries on hand
If the price pressure seen on L&T and BHEL is any indication, then the bets are clearly on a slowing economic cycle. The reasons are not far to seek. The states of Andhra Pradesh and Maharashtra are doing a rethink on their major capital investments and L&T has major stakes in both these states. In addition, the government has also gone slow on a number of its capital investment projects due to the pressure on the fiscal deficit and the corporate tax relief offered. That pressure will be visible in the form of lower order flows and weaker revenue growth in December.
Overall, the December quarter is likely to see pressure on the top-line and bottom-line across most sectors. But, the combination of the fiscal boost and the monetary easing are likely to have a positive impact in the next fiscal year. For now, the quarterly numbers will get worse before it gets better.