Banks to outshine, metals may disappoint in Q1FY23 results

The January-March quarter coincided with the beginning of the Russia-Ukraine war. The June quarter, however, assumes more importance as it is expected to showcase the full impact of the Russian offensive in Ukraine. 

From here on, investors are set to gauge the trajectory of India’s corporate profitability, as domestic and global macroeconomic cues continue to remain unsupportive.

Against this backdrop, analysts expect the June quarter earnings to be a mixed bag.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, Financials to outshine in Q1FY23. Credit growth impressive, will sustain, ge says. IT revenue expected to be healthy. IT margins may be pressured due to high employee costs.

Analysts are also bullish on the auto sector, in particular, which they say, has benefitted from the sharp decline in input costs.

According to Narendra Solanki, Head-Fundamental Research, Anand Rathi, esing semiconductor shortage, price hikes to improve auto margins. Valuation of IT, specialty chemicals, manufacturing attractive. Consumer space may post muted volumes. Recent pass through in prices could stabilise margins.

That said, experts expect metals to deliver disappointing numbers as they digest the correction in prices along with the export duties on steel and iron ore that the government imposed at the end of May.

Kotak Institutional Equities says that most of its recent earnings downgrades for the Nifty50 index have stemmed from the government’s export taxes on metals, and oil fuels.

The brokerage’s Nifty FY23 net profit growth estimate now stands reduced at 9.9% from 17.1% before the government’s duty hikes.

According to the brokerage "The new taxes are deleterious since they are on revenues and, thus, have a disproportionate impact on earnings. Moreover, the levying of new taxes may raise concerns among direct and portfolio investors about the overall investment climate in India” 

Domestically, market action will be stock-specific today. Investors will also closely track US Fed’s recent meeting minutes due to be released later in the night.