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India Quarterly Results Expectations + Sectoral Performance

July 2, 2007

Most Indian companies will report their earnings for the first quarter ended June-30th in the next few weeks. This is also the quarter where corporate India will measure the impact of rate hikes in the past few months.

According to Citi research, the top 3 sectors to outperform on basis EBITDA margins are Media, Cement and Telecom. The worst 3 sectors are Sugar, Metals and Textiles.

Autos:
One of the worst hit sectors from top-line deceleration due to base effect, higher interest rates and tighter liquidity. Despite INR appreciation, auto ancillary
exporters expected to do well due to exposure to non-USD markets like Europe.

Banks:
Loan growth slowed, but should still be healthy for the quarter at around 27%

Capital Goods:
Continued strong order flow and order execution momentum to keep earnings growth robust here.

Cement:
Despite government intervention in pricing, average prices should still be up 10-11% yoy, driving better margins and strong profits.

Consumer:
Steady top-line growth. Margin pressure in home and personal care segment.

IT Services:
Currency appreciation of 6.4% during the quarter and wage hikes for many companies will weigh on margins.

Metals:
Aluminum saw lower domestic prices yoy due to currency appreciation. Steel Profitability better this quarter due to 10-11% higher prices.

Telecom:
Strong momentum on subscriber addition sustained at 6.1m/month. Margins will expand a bit further on scale economies and operating leverage. Another sector with significant foreign exchange gain on INR appreciation due to forex debt with companies.

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