Indian Profit Estimates to Drop Another 25%, Credit Suisse Says
Originally reported on Bloomberg
Indian earnings estimates for the next fiscal year may be cut another 25 percent, led by revisions for banks, as the economy weakens, Credit Suisse Group said.
Analysts will probably double the one-quarter reduction in forecasts since November for the year starting April 1, as profit growth at banks, brokerages and developers falters, Credit Suisse analysts Nilesh Jasani and Arya Sen wrote in a report. Predictions for companies on the Bombay Stock Exchange Sensitive Index this fiscal year have been lowered by 15 percent.
The Sensex has dropped 6.6 percent this year, extending 2008’s record 52 percent slump, as the global recession and financial crisis weighed on the outlook for corporate earnings. Investors should avoid financial companies, making up 32 percent of profits after tax in India, because current predictions for their earnings are too optimistic, Credit Suisse said.
“We remain underweight on the sector and expect it to be the main contributor to depressed 2010 earnings,” the analysts said. “For financials’ profits to grow at over 30 percent year- on-year, while the rest of the corporate world is witnessing a contraction of the same magnitude, is unsustainable.”
Financial companies’ earnings, which grew about 30 percent in the third quarter from a year earlier, will falter as the central bank cuts interest rates, demand for loans slows and provisions increase, the report said.