What to expect in Q2 FY 17 earnings season?

With the earnings season round the corner market participants will be keenly watching stock specific performances and earnings' growth delivered by the large cap stocks. The Q2 earnings are expected to be better than the Q1 earnings for the index stocks. Market sources suggest the sales of diversified Nifty-50 companies can grow three per cent in the July-September quarter when compared with the year-ago period.

The important sectors where the growth in earnings can be seen are: domestic cyclicals like Automobiles and Cement. Earnings improvement is also expected in select Private Banks, Consumer Staples and NBFCs' space. Auto companies are also expected to deliver healthy growth in earnings this quarter.

Banks will remain in focus, as in previous quarter the earnings were marred by the AQR (Asset Quality Review) related issues, and accelerated provisioning affected the profitability for the sector in previous quarter. This quarter the story on provisioning front is expected to be repeated, although banks may reflect some bond gains, which will slightly improve the reported earnings. Another aspect that can boost profitability for banks is the reduction in cost of funds for banks.