Mumbai: The aggregate net profit of the Nifty 50 companies is expected to grow in double digits for the second consecutive quarter following festive demand and low base effect in case of some companies due to the demonetisation impact during the year-ago quarter.

According to ET Intelligence Group's estimates, net profit of the sample will grow 13.1 per cent and net sales by 8.2 per cent year-on-year. The growth momentum is likely to continue from the previous quarter when net profit and net sales had increased by 14.5 per cent and 10.5 per cent, respectively.

"The Q3FY18 performance is likely to indicate an improvement in earnings momentum, with earnings set to clock double-digit growth," mentioned Edelweiss Securities in a report. It expects 12 per cent earnings growth for the Nifty 50 companies.

The operating margin of the sample is also likely to remain above 20 per cent for the second quarter in a row. According to ETIG estimates, the sample's margin will be 20.7 per cent in the December 2017 quarter compared with 19.2 per cent in the year-ago quarter.

Commodity companies, including metals and petroleum producers and refiners, consumer durables and nondurables, automobiles, select private sector banks and finance companies, and power utilities are expected to report stellar numbers for the third quarter.

On the other hand, public sector banks, pharmaceuticals, software services, real estate, and telecom companies are likely to report weakness.

"We expect double-digit growth in net income of automobiles, cement, consumer products, energy, industrials, metals & mining and NBFCs sectors. We model year-onyear decline in the net income of PSU banks, pharmaceuticals and telecom sectors," Kotak Institutional Equities said in a report. It expects the Nifty 50 sample to report 15.4 per cent earnings growth for the December quarter.

The earnings momentum is expected to continue in the fourth quarter of the fiscal as well considering the persistence of low base effect and historically strong sales volume during the quarter.

December quarter: Sector expectations

AUTOMOBILES
The favourable base effect and normalisation of the channel inventory is likely to support the earnings of auto companies in the December quarter. Their revenue is expected to grow by 10-18 per cent. However, the operating profit may be impacted by higher commodities prices. Mahindra & Mahindra, India's largest tractor maker, is likely to post higher earnings growth among all the auto makers thanks to a 16 per cent volume growth in the high- margin tractor segment and improvement in profitability in both automotive and tractor businesses. Tata Motors may see significant increase in profit on lower foreign exchange loss.

BANKING AND FINANCE
Banks with significant corporate exposure may continue to report pressure due to higher credit costs. In addition, though loan offtake by industries was higher, rising interest rates may squeeze net interest margins. Among finance companies, the housing and automobiles segments will show stellar performance on higher demand for credit.

CAPITAL GOODS
Public sector capital expenditure (capex) will continue to provide momentum amid subdued private sector spending. Companies including BHEL and PGCIL reported large government orders during the December quarter. For L&T, it is expected to be a muted quarter.

CEMENT
All-India cement prices fell by 2 per cent sequentially to Rs326 per 50-kg bag in the December quarter. In comparison with the last year's December quarter, cement prices have moved up by just over 5 per cent to Rs326 per 50-kg bag. On the other hand, prices of sand, a major raw material, rose by four-five times year-on-year due to lesser availability. Also, construction activities in real estate were subdued. Given this, cement companies would be unable to record any meaningful improvement in realisations. The low-cost housing segment may however support volume growth to some extent. As a result, large and pan-India cement companies are expected to clock 9-12 per cent revenue growth in the December quarter.

FMCG
The low base effect of the previous year due to demonetisation and GST benefits to organised players will help FMCG companies post high single-digit and in some cases double-digit sales growth for the December quarter. Moderation in raw material prices, especially agriculture related raw materials, will help strong margin expansion.

INFORMATION TECHNOLOGY
The December quarter has been historically weak for Indian IT exporters given holidays and the beginning of fresh capex cycle for the US clients. Top IT companies are expected to report 1-2.5 per cent sequential revenue growth in dollar terms. The performance in the quarter will be crucial in determining whether the companies will be able to outdo the previous year's lackluster growth at the end of the current fiscal in March.

METALS & MINING
Metals and mining companies will continue their growth momentum in the December quarter. The ferrous companies such as Tata Steel will benefit from higher product prices. Non- ferrous companies such as Hindalco, Vedanta and Hindustan Zinc will benefit from the higher LME prices amidst relatively benign raw material prices. The companies will see dual benefit: one, from seasonally strong quarter; and second, from firm prices thus leading to higher profitability.

PHARMA
The December quarter was an action-packed quarter for pharma with USFDA giving the highest ever approvals (246) in a single quarter. Although this will help benefit Indian pharma companies, it may also lead to higher competition and pricing pressure. Considering steep competition and stronger rupee against major currencies, the growth in pharma revenue from overseas market will be under pressure.

POWER
In the December quarter, all-India power generation rose by 4.2 per cent YoY. All-India thermal plant capacity utilisation also improved marginally to 59.8 per cent. Initial signs of pickup in power demand are apparent, led by improving traction in industrial activity. This should help power companies such as NTPC and Power Grid post good numbers.

TELECOM
Competitive pressure and reduction in interconnect charges will affect the performance of the listed telecom players. The user parameters such as average revenue per minute and per user will remain under pressure.