Most sectors may report low earnings in Q4

The Indian equity market is likely to see one of its worst phases, with most sectors expected to report a decline in earnings or single-digit earnings growth in Q4 FY'09, a leading broking firm said in its report.

"Banking would be the best-performing sector with earnings growth of 16 per cent YoY. While metals and real estate would see earnings decline by 86-90 per cent

year-on-year (YoY), other sectors with steep earnings decline would be autos and pharma," broking firm Motilal Oswal's India Strategy report said.

The quarter-on-quarter (QoQ) trends are divergent from YoY trends for a few sectors. Banking and FMCG will report a QoQ decline in earnings, while auto and cement will witness a growth, it said.

"While the monetary policy has eased significantly in H2 FY'09, credit demand has slowed down to 18 per cent. As the recovery in earnings momentum will take time, attractive valuations remain the key driver for the stock market at the current level," Motilal Oswal director - Research Rajat Rajgarhia said.

Domestic inflows will continue to drive institutional interest in equities, any change in the FII flows will create meaningful impact on Indian equities, the report said.