Q3: Revenue growth pace could be slower, margins under pressure

The October–December earnings season could turn out to be a forgettable one for India Inc. While revenues should grow in double digits, the pace could be substantially slower than seen in the last few quarters, coming in at around 12-13 per cent year-on-year. Aggregate sales will be propped up by better revenues of export-oriented businesses like IT and pharmaceuticals; the rupee weakened a little over 10 per cent y-o-y during the quarter.

The base effect — Q3FY18 was a good quarter thanks to the demonetisation impact in Q3FY17 — will impact some sectors. However, with costs elevated and companies possessing little pricing power, margins are likely to be under pressure. Kotak Institutional Equities (KIE) expects the net income for the universe of stocks that it tracks to remain flat in Q3FY19. The net income for the 50 companies in the Nifty-50 index is, however, tipped to fall 3 per cent y-o-y.

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