The earnings season for the third quarter ended December 31, 2019, which takes off from Friday, is expected to be yet another muted show with the domestic economy in the grip of a slowdown.

Auto, metals, construction and oil and gas are some of the sectors that are likely to continue feeling the pinch of the slowdown. Analysts, however, feel there could be some good news from the banking sector because of some large resolutions and a drop in the pace of bad loans.

Consumer goods and telecom are expected to put up a decent show, the latter buoyed by a tariff hike since December. However, the full impact of the hike in call and data tariffs is expected to be seen only in the fourth quarter of this fiscal.

IT to fare better

Bangalore-based Infosys will be the first frontline company to declare its numbers for the October-December period. Though the third quarter is usually a seasonally weak time, because of holidays in key markets, a weak rupee and a favourable cross-currency movement is expected to benefit the tech players.

Analysts, however, point out that they will watch out for the performance of verticals such as BFSI (banking, financial services and insurance) and retail and the management commentary on client spending in the current calendar year.

Brokerages expect Infosys to report a net profit of around Rs 4,000 crore. They are also not ruling out the possibility of the firm revising upwards its revenue growth guidance for the year from 9-10 per cent in constant currency terms.

Brokerages such as HDFC Securities expect Infosys to raise this to 9.5-10.5 per cent.

In banking, the bottomlines of the lenders will benefit from the tax rate cuts and recoveries from cases such as Essar Steel. While the asset quality will be stable, credit costs will continue to be firm.

However, the overall picture, when one includes other industries, is still not rosy with experts of the view that the corporate tax cuts announced by the Centre in September have at best stemmed the losses.

“The upcoming earnings season will be one more quarter of muted earnings… Corporate commentary on the underlying demand scenario and any sequential improvement post government announcements will be the key monitorables,” a note from Motilal Oswal Institutional Equities said.

The brokerage feels that the net profits of companies in its coverage will rise 9 per cent over the same period last year, led by the BFSI sector which will contribute a huge 81 per cent to incremental profit.