Effect of demonetization in Q3FY17 to benefit in YoY growth in Q3FY18, banks to see lower trading profits
PL universe is expected to have a better Q3FY18 with 15.7% and 9.2% increase in revenues YoY and QoQ respectively. PAT is also expected to see 17.1% and 10.8% growth YoY and QoQ, EBITDA margins is expected to see 15bps expansion YoY and 111bps contraction QoQ. The contraction in margins coming mainly from Cement, Autos and Oil & Gas sectors. The growth is mainly driven by good performance coming from three sectors, Metals with a 20.0% revenue growth and 54.5% PAT growth, Banks with 18.7% revenue growth and 22.1% PAT growth, Financial Services with 14.8% increase in NII and 123.9% PAT growth all on a YoY basis and Automobiles with 16.0% revenue growth and 30.6% PAT growth.
Private capex still remains slow, Credit growth shows strength on lower base effect
The credit growth have improved for the system to 10.65% for the fortnight ended December 22, 2017 mainly on stronger retail credit growth while the corporate credit growth remain muted. On a YoY basis, The liquidity continues have changed and this is reflected in the bond yields with the 10 year Gsecs having increased from 6.51% in 31 Dec 2016 to 7.37% as at 09 January 2018. While we have not seen any significant increase in lending rates, this could keep the spreads under pressure for the near term for the banks as the corporate sector continues to see low off take on lower demand and capex.
Nifty Earnings for FY18 mainatined at Rs425.8
Overall Net earnings for the Nifty is expecetd to increase 12.2% in FY18 (down from 14.9% in September 17 estimates) and 19.0% in FY19. In both the years, the earnings will be driven by Banks & Financial Services. BFSI is expected to have a 16.7% earnings growth in FY18 and 36.5% in FY19.For the Nifty universe, the growth in revenue is expected at 15.3% YoY and 10.9% QoQ, EBITDA at 13.1% YoY and 3.7%qoq with net income up at 11.6% YoY and 9.4% QoQ.
Effect of good rain to be seen in Rabi output
The monsoon in FY18, was above the LPA but erratic. This had created a scenario where there were some crop losses due to erratic monsoon. However, two years good monsoon has resulted in improved water table and this should augur well for the current Rabi season as well as FY19. We expect this to result in the agri commodity prices inflation under check, while the yields for the farmers are expected to improve. However, the loss in cotton crop and soya bean crop due to pest infestation has resulted in certain areas like Vidharbha seeing serious losses for the farmers.
Trade deficit could see an increase due to crude prices
The trade deficit has remained steady on steady crude oil prices though exports continue to remain a challenge. However, with the crude reaching a 12 quarter high recently, this could insert pressure on the trade deficit.
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