A lot has changed from the last quarter to this quarter — the government has made some major announcements with the recent corporate tax cut being one of the crucial ones. All these steps were taken by the government keeping one thing in mind — a revival of economic growth. But looks like the impact of all these steps will take a few more months to be felt.

Brokerage houses are expecting yet another weak quarter of corporate earnings in Q2. Weakness in economic data — GDP growth at 5 percent in quarter 1 — and the RBI’s latest revision of GDP forecast to 6.1 percent from 6.9 percent earlier would keep the downgrading going for corporate India, the brokerages believe. However, they say that the corporate tax cuts will result in several adjustments in quarterly numbers.

Nifty50 earnings growth is expected to decline by 2 percent in Q2FY20. While auto, metal, oil & gas will remain laggards, financials, cement and industrials are expected to remain as leaders.

"Earnings downgrade will continue due to weak consumer demand and lower realisations for commodities. A pick-up in consumption is expected in H2 of FY21," said Motilal Oswal.

Sector-wise expectations for Q2 of FY20:

Automobiles:

Revenues are expected to decline in double-digit. Profits are expected to decline for auto companies — the sixth consecutive quarter of such decline. Margins will take a hit due to higher discounts and lower volumes. Tata Motors is expected to post sharp losses.

Banks and financials: Private banks are expected to report healthy growth driven by ICICI Bank, Axis Bank, Kotak Mahindra Bank. Overall slippages are expected to be contained due to reasonable treasury contribution and servicing or restructuring of some large exposures. PSU Banks will continue to post losses while NBFCs are likely to drive the sector with healthy growth primarily led by HDFC, Bajaj Finance.

Technology & Telecom: Revenues of IT companies are likely to grow in single-digit but rupee depreciation will help expand margins on QoQ basis. Telecom is expected to report a loss for the ninth straight quarter.

Pharmaceutical: Domestic pharma companies will continue to do well due to price hikes and single high-digit growth is expected. The regulatory overhang will continue for pharma companies.

Consumption: Volume growth will continue to remain under pressure due to muted rural demand and weak sentiment. Delayed monsoon and flooding could have an impact on the distribution channel. Pidilite, Marico are likely to take a back seat while Dabur, Britannia, Page will report flattish growth. The front seat will be taken by HUL and ITC, which are likely to grow anywhere between 8 and 9 percent. Election overhang on liquor companies is now behind, so USL and UBL are expected to report high single to low double-digit growth but margins will remain under pressure due to higher raw material prices.

Cement: Growth will come on low base but channel checks suggest cement volumes have weakened further across India and will likely decline by 5-6 percent YoY in Q2FY20. While companies will enjoy the partial benefit of a 25-30 percent decline in coal/pet-coke prices. Therefore, EBITDA/Ton is expected to increase by 20-35 percent YoY.

Metals and Mining: Weakness will continue for Indian steel companies on QoQ basis due to weak prices, muted volumes. NMDC, Tata steel will see sharp declines in their earnings.

Media: Ad revenues will continue to see the lagged impact of the new TRAI order. Broadcasters are expected to report subdued ad revenue growth in the September quarter. Multiplexes are expected to grow healthy revenues while print industry’s growth will remain elusive.

Oil & Gas: Profits will improve due to sequentially lower crude prices. Also, refining margins will improve materially for domestic refiners, especially RIL. OMCs are also likely to gain from the trend, but the impact could be reduced by inventory losses.

Capital Goods: Sales growth is expected anywhere between 9 and 10 percent primarily driven by L&T, Crompton Consumer, Blue star while BHEL, Voltas could drag the overall sector performance.

Top picks of brokerages

Motilal Oswal

Largecaps: ICICI Bank, SBI, HDFC, Bharti Airtel, L&T, Infosys, Maruti, HUL, Titan, NTPC.

Midcaps: Indian Hotels, Federal Bank, MMFS, Ashok Leyland, ABFRL, JK Cement, Oberoi Realty, Colgate, Alkem Labs.

Antique

Largecaps: HDFC Bank, ITC, ICICI Bank, L&T, Ultratech Cement, Hindustan Zinc, Bajaj Auto, Adani Ports, GAIL India, Siemens, Eicher Motors, Marico, UPL, Dr Reddy's, Muthoot Finance and Bharat Electronics.

Midcaps: Honeywell Automation, TVS Motor, Gujarat Gas, Phoenix Mill, Natco Pharma, Kajaria Ceramics, NIIT Technology, NALCO, Johnson Control, MOIL, CCL Products, TCIL and Dhanuka Agritech.

* Source for analysis: Q2FY20 preview reports from Motilal Oswal, Antique and BofAML.