BSE Sensex earnings downgrades to continue: BofA-Merrill Lynch


Bank of America Merrill Lynch says it expects FY14 BSE Sensex earnings per share (EPS) to be downgraded below 1,300 rupees, which is a growth of under 10 percent versus current expectations of 17 percent, citing concentration risk and a delay in economic recovery.

The investment bank says five stocks, namely Oil and Natural Gas Corporation Ltd, ICICI Bank Ltd, HDFC Bank Ltd, State Bank of India and Tata Steel Ltd account for nearly half of the profit growth.

The bank notes that rate cuts have been slow and therefore sales growth in FY14 will continue to be weak.

BofA-Merrill adds that FY14 EPS growth, at 8-9 percent, will be higher than the 5 percent for FY13 and that long-term investors have probably been close to the bottom of the earnings cycle, though FY14 is unlikely to be the year of recovery.

Sensex EPS likely to be under Rs 1,300 for FY'14: BofA ML

(PTI) The earnings per share for the BSE benchmark Sensex for the 2013-14 fiscal is likely to be under Rs 1,300, Bank of America Merrill Lynch research said today.

According to the financial services major, FY13 Sensex EPS has been downgraded from Rs 1,510 to Rs 1,175, and FY14 Sensex EPS is likely to be downgraded to below Rs 1,300.

"Over the past 2 years, we have sounded like a broken record with our theme that earnings is likely to be downgraded. Unfortunately, we were right, with FY13 Sensex EPS likely to come in below Rs 1,200...we expect FY14 Sensex EPS to be downgraded below Rs 1,300," BofA ML said.

Mainly, two factors would lead to downgrades in FY14 -- concentration risk and delay in recovery.

Concentration risk is the main reason behind the Sensex EPS downgrade as two sectors (financials and energy) account for half of the profit growth in FY14 and just five stocks (ONGC, ICICI Bank, HDFC Bank, State Bank, Tata Steel) account for nearly half of the profit growth, it said.

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