Infosys has started off the Jun-09 earnings season on a positive note. But, we still expect a third successive quarter of earnings de-growth in India.
We forecast Nifty50 ex-energy profits to fall 11.4% y-o-y for the Jun-09 quarter (better than -21% in the preceding quarter).
While some of the worst affected sectors from this downturn are likely to show a bottoming out trend, meaningful recovery will not be visible in these results.
We expect an 8% y-o-y decline in Nifty50 revenues. Excluding energy, revenue decline will be moderate at -2% y-o-y (better than -6% y-o-y in the Mar-09 quarter).
EBITDA margins will decline 207bps y-o-y, with materials and real estate likely to show maximum contraction. Consumer and IT services will be the sectors to see y-o-y small margin improvements.
The markets strong run needed support from earnings upgrades. While earnings upgrades had started in a small way in the last couple of months, we expect recent tax changes, lack of lending rate cuts and dent in sentiment to once again pause earnings momentum for at least three months. Lack of upgrades will be a valuation hurdle for the market.
Consumer staples (+27%), IT-Services (+17%) and utilities (+13%) would lead the pack in terms of profit growth this earnings season. Worst performers will be materials and real estate.