(Photo: Mint)
(Photo: Mint)

Not just in India, financials sector holding the fort across Asia

  • In India, the financials sector is seen compensating for the poor performance of others
  • Within financials, analysts expect corporate banks to be the main drivers in the June quarter

IHS Markit’s Asia sector purchase managers’ index (PMI) survey for June showed that financials remained the top-performing broad sector in Asia. The output index reading for the financials sector stood at 53.4 in June.

Readings above 50 signal expansion, while those below 50 indicate contraction.

On the other hand, industrial goods, metals, and automobiles were the laggards, according to the survey. Readings for these segments were below 50.

Asia Sector PMI indices are compiled from responses to questionnaires sent to purchasing managers in IHS Markit's Asian PMI survey panels, covering over 6,000 private sector companies in 13 countries.

In India as well, the financials sector is seen compensating for the poor performance of others. A slew of brokerages expect June quarter earnings to be driven by financials, offsetting the weakness in consumption-related sectors.

Domestic brokerage house JM Financial Institutional Securities Ltd expects year-on-year (y-o-y) profit after tax growth for its coverage of 167 companies to be almost zero if one were to exclude financials. “For the Nifty50, earnings per share is likely to grow by around 21.5% aided by strong growth in financials even as telecom and consumer discretionary remain a drag," it said in its June quarter earnings preview report.

Within financials, analysts expect corporate banks to be the main drivers in the June quarter. It should be noted that financials put up a good show in March quarter earnings of fiscal year 2019 as well.

Kotak Institutional Equities expects the net income of companies under its coverage to increase 1.3% y-o-y in the June quarter, led by the banking sector. Banks are likely report strong earnings growth due to a low base. "Excluding the banking sector, we expect net income to decline 6.7% y-o-y," added its earnings preview report.

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