Morgan sees IT, telecom earnings growth slacken

India Inc's robust earnings in the first half of this fiscal may not sustain the momentum into the second half due to a slowdown in the IT and telecom sectors, thereby making it difficult to match the growth forecast for the entire fiscal, according to global equity research firm J P Morgan.

"The street expectation for corporate India of 34% growth for the financial year 2007 seems stretched as incremental risks are emerging for key sectors, including IT services and telecom," says J P Morgan's latest Asia Pacific Equity Research report.

The risk to earnings disappointment is building up, because the base effect would be more challenging in the second half with key sectors like IT and telecom facing some hurdles on their way, the report said.

"The current street expectation of 34% growth for FY07 seems stretched in the backdrop of 31% growth reported in the first half, particularly as the base effect would be more challenging in the second half," JP Morgan analysts Bharat Iyer and Bijay Kumar said in the report.

The major contributors towards the 31% growth, witnessed in the first half of the current fiscal, were - IT, telecom and building materials. The earnings growth momentum in building materials is expected to continue unabated into the second half, however, risks are emerging for IT and telecom sectors.