Heatwave, elections in India create unlikely earnings winners and losers

A scorching summer and a long-drawn election in India may throw up some unlikely winners and losers this earnings season with consumption-linked firms like Bajaj Auto Ltd. slated to report this week. The retail business of Reliance Industries would also be closely watched in the conglomerate’s earnings Friday.

Demand from villages and smaller towns outpaced that of cities in the April-June quarter in a sign of India’s broad-based economic growth. Supermarkets operator Avenue Supermarts Ltd., which has an extensive presence in India’s smaller towns, reported a 17 per cent increase in 1Q profit Saturday, though it narrowly missed earnings estimate. Motorcycle maker Bajaj Auto’s monthly sales reports have signaled fewer inquiries and deferred purchase decisions by potential customers due to the extreme weather. Both stand to benefit from forecast of an above-normal monsoon. 

Finance Minister Nirmala Sitharaman is widely expected to propose measures to boost consumption when she presents federal budget on July 23 giving further impetus to consumer-facing firms and retailers that have been hit by weak rural spending in the past few quarters.

Meanwhile, Taiwan Semiconductor Manufacturing Co. is projected to record its strongest growth for quarterly earnings since the end of 2022. Sales for June also surpassed expectations amid rising demand for AI infrastructure. Earnings optimism pushed the firm’s Taipei-traded shares past NT$1,000 earlier this month, briefly surpassing $1 trillion in market capitalization. 

The AI boom should also fuel demand for services offered by Indian IT exporters Infosys Ltd. and Wipro Ltd. Sector leader Tata Consultancy Services Ltd. on Thursday reported profit that met analysts’ estimates, signaling corporations are gradually resuming spending on projects. 

Highlights to look out for:

Tuesday: Bajaj Auto (BJAUT IN) may see the slowest profit expansion in five quarters as vehicle sales growth was muted by heat waves in several parts of India. According to the Federation of Automobile Dealers Associations, weather and elections led to lower footfalls at showrooms and delayed purchases. The company launched a new CNG-powered motorcycle earlier this month, which could help further boost its share in that product category, said Jefferies.

Wednesday: Asian Paints (APNT IN) first-quarter net income should fall 9.2%, consensus estimates show. Revenue growth was muted due to price cuts and a weaker mix, said Jefferies. Gross margin gains are also expected to be partially offset by higher spending and negative operating leverage, according to Kotak Institutional Equities.  

Thursday: TSMC (2330 TT) second-quarter net income likely rose 29%, estimates show. Several brokerages including Morgan Stanley have raised price targets for the chipmaker as businesses race to secure hardware to build AI-supporting infrastructure. Key highlights for its upcoming earnings include how much TSMC can negotiate price increases after seeing strong product demand.

• Infosys (INFO IN) first-quarter net income will likely find support from higher revenues across segments, estimates show, even though financial industry revenue fell slightly. Emerging technologies make up more than 60% of its total sales, but the Indian IT company’s near-term growth is likely to remain pressured by weak enterprise IT spending, Bloomberg Intelligence said.

Friday: Reliance Industries (RELIANCE IN) could see quarterly earnings dragged by lower demand for its oil and chemical products with falling diesel prices, according to BI. Retail sales saw a slower 6% growth this quarter due to slower store additions. The telecom business should benefit in the coming quarters from tariff hikes that will be implemented from July. Consensus shows net income rose 13% for the quarter.

• Wipro’s (WPRO IN) first-quarter revenue may be lower in constant currency terms, but its margins are expected to expand, as per estimates. Analysts at Nomura expect Ebit margins to expand on its continued cost control program and higher utilization at Capco. Recent strategic partnerships with other companies such as Siemens for automotive software should support the company’s earnings over the long term.