It’s earnings season again, and the overall mood in corner offices seems upbeat. There are expectations that a further strengthening of the banking and financial sector—which makes up 35.95 per cent of the benchmark Nifty 50 index—and a revival in capex might boost India Inc.’s second quarter results in FY24. But, with global demand weakening and uncertainties persisting, IT firms may miss their revenue estimates. Separately, an increase in crude prices and high inflation are expected to impact the bottom lines of consumer staples, oil marketing companies (OMCs), airlines, and paint manufacturers, analysts say. From a macroeconomic perspective, inflation eased to 6.83 per cent in August from 7.44 per cent in July due to a decline in food and vegetable prices, but continued to stay above the Reserve Bank of India’s tolerance level of 6 per cent. India Inc. will deliver “good numbers” in the September quarter, believes V.K. Vijayakumar, Chief Investment Strategist of Geojit Financial Services. “The overall Q2 results will remain in line with the Q1 results,” he says. Nifty 50 firms, however, posted a 2.3 per cent year-on-year (YoY) fall in consolidated net profit despite a 26 per cent YoY rise in gross sales during Q2FY23. Further, a report from Nuvama Institutional Equities states “We forecast revenue/PAT growth for our coverage universe (excluding OMCs) would be 6-18 per cent YoY”. Like in the last few quarters, Vijayakumar says, the financial sector is expected to post decent numbers. Sharing similar views, Srikanth Subramanian, CEO of one-stop investment platform Kotak Cherry, says, “We see the banking sector doing well, especially private banks, on the back of strong loan growth and healthy asset quality.” Banks are expected to post earnings growth of around 20-25 per cent YoY in Q2, states a research note from Motilal Oswal Financial Services. “We expect our coverage banks to sustain pre-provision operating profit (PPOP) growth at 12 per cent YoY in Q2,” the report adds. Agrees Palka Arora Chopra, Director at Master Capital Services: “Corporate earnings will remain healthy across Nifty 50 firms in the banking, cement and auto sectors.” But, due to the slowdown in external demand, she says, IT and chemicals firms will deliver subdued results. For IT firms, not much has changed in the past few months, states a report from HDFC Securities. Although Q2 has historically been seasonally strong, Q2FY24 is likely to be soft as most demand indicators are trailing 10–15 per cent below levels at the beginning of the year, and only slightly better than the July lows, the report explains. “Growth divergence is expected between companies, with Tier I IT sequential growth ranging from -1.4 per cent to 2.2 per cent, and mid-tier IT sequential growth ranging from 0.9 per cent to 3.8 per cent,” it adds. “Weak global demand may continue to weigh on IT firms in Q2. It will be important to hear out the management commentary as to how they see things panning out for the rest of FY24,” says Subramanian. IT heavyweights TCS, Infosys and HCL Technologies are expected to release their financial results for Q2 in the second week of October. Last year, these three firms together reported nearly 20 per cent YoY growth in consolidated gross sales at Rs 1.16 lakh crore in Q2. Their combined consolidated net profit also grew 9 per cent YoY to Rs 19,941 crore. Other sectors that are expected to deliver strong results are capital goods, auto and cement. “The capital goods sector will also deliver good numbers, particularly Larsen & Toubro, thanks to their robust order book, while margins of automobile players will improve due to soft commodity prices,” says Vijayakumar. Market watchers also believe that cement producers will post good numbers due to the price hikes they’ve rolled out. A report from Icra says the cement industry is expected to post volume growth of 7-8 per cent in FY24. Further, Chopra of Master Capital says, “The hike in cement prices will lead to an improvement in Ebitda per tonne in Q2FY24 with sustained housing demand, and the infrastructural push will improve margins and bottom line in Q2FY24.” But, analysts have mixed views about the FMCG sector. While Chopra is positive about the sector, Vijayakumar feels the sector will grow at the same pace as last year, as rural demand is yet to pick up. Amid the high crude prices, margins of OMCs are under pressure, too. Crude prices jumped to $90.79 per barrel on September 29 from $70.64 on June 30. Kranthi Bathini, Equity Strategist at WealthMills Securities, says, “Rising geopolitical tensions in the Middle East will have a bearing on crude prices in the short to medium term. Elevated crude prices will have a negative impact on market sentiment, and also affect margins in Q3. Any increase in oil prices will also push inflation.” Most sectors have received positive forecasts for Q2. But there is a pall of uncertainty over Q3 due to the war in the Middle East. @iamrahuloberoi