Corporate earnings are expected to grow by about 25% in 2016-17, on likelihood of good monsoon, monetary easing as well as recovery in commodity prices, says a report.
According to the report by Motilal Oswal Securities, last fiscal's earnings decline was heavily influenced by headwinds from low commodity (metals and crude oil) prices, significant NPAs, two consecutive years of poor monsoon impacting consumer sector growth and lack of material transmission of rate cuts.
"For 2016-17, most of these headwinds are turning into tailwinds along with favourable base," the report said.
"We estimate 25% PAT (profit after tax) growth in FY17 and 24% CAGR (compound annual growth rate) over FY16-18," it added.
The report further said, likelihood of normal monsoon, government's focus on rural areas and implementation of the 7th Pay Commission's recommendations would provide strong impetus to consumption.
Besides, recovery of metal prices from bottom driving metal sector earnings and transmission of RBI's 2016-17 rate cuts will benefit corporate earnings.
Moreover, large part of banking and financial sector NPA being provided in previous fiscal would give a favourable base for the the current financial year.
Auto, FMCG and financial sector would exhibit continuous strong earnings growth.
In the financial sector, Bank of Baroda, M&M Financial Services Ltd and Shriram Transport would see a sharp recovery in this fiscal, on the back of significant NPA provisioning in 2015-16.
like UltraTech (recovery in cement volumes driven by investment cycle recovery) and JSW Steel (recovery in steel prices coupled with strong volume growth) would also witness sharp profit growth," the report said.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.