Indian stock markets might see double-digit profit growth yet again1 min read . Updated: 10 Jul 2018, 05:01 PM IST
Companies in the BSE Sensex to report a 23% increase in net income in the June quarter, with more than three quarters of the 30 members likely to contribute positively to aggregate profits
Mumbai: At a time when emerging markets have been roughed up by trade tensions between the world’s biggest economies, the earnings picture in India is improving. That’s the message from Morgan Stanley as it expects companies in the BSE Sensex to report a 23% increase in net income in the June quarter from a year earlier, with more than three quarters of the 30 members likely to contribute positively to aggregate profits. That would mark a third straight quarter of double-digit growth, according to data compiled by Bloomberg.
“Results should show some recovery and broadening of earnings growth," Morgan Stanley analysts Sheela Rathi and Ridham Desai said in a 5 July report.
There’s more. Research firms from Deutsche Bank AG to Crisil Ltd are also bullish. “Besides the supportive base-effect, there is also a strong revenue boost owing to higher global commodity prices," Bijay Kumar, an analyst at Deutsche Bank AG wrote in a note. He expects earnings for stocks on the Nifty 50 Index to rise by 20%.
Thanks to a robust recovery from the national sales tax introduced last July and higher metal prices, revenue growth in the period may reach a three-year high of 13%, according to Crisil Ltd. Actual earnings that reinforce analysts’ forecasts will help justify optimism among analysts about the $2.1 trillion market’s prospects despite headwinds caused by high oil prices, a weak rupee and hardening interest rates.
India’s economic growth has picked up in recent months, prompting the central bank to raise its outlook for gross domestic product growth to 7.4% in the year that started 1 April from 6.6% in the previous year. The world’s fastest-growing big economy is relatively shielded from trade risks due to its large domestic market, which has added to the allure of its stocks.
The Sensex jumped 7.5% in the June quarter in local-currency terms, the top performer among developing nations. That’s as the MSCI Emerging Markets Index slid almost 9%, data compiled by Bloomberg show. The Sensex rose 0.8% to a five-month closing high on Tuesday.