Consumption-linked sectors driving cyclical recovery, last quarter to end at ~ 9% growth

CRISIL Research expects corporate revenue – excluding that of banking, financial services and insurance, and oilcompanies – to rise ~ 9% on-year in the fourth quarter to March 31, 2018. On-year growth will slightly slowcompared with the third quarter, largely on account of higher base for consumption-linked sectors, which hadpartially recovered from demonetisation in fourth quarter of last year.

Consumption-linked sectors, with the exception of telecom services, is expected to grow in mid-to-high teensfor the third consecutive quarter, driven by improving macros, a pick-up in consumer sentiment, and growingrural demand, along with the fade-out of GST-related disruptions. Commodity-linked sectors, such as steelproducts and petrochemicals, are expected to continue growing amid surging prices. Cement will continue towitness high volume-driven growth, led by significant increase in capacity for a large player and high demandfrom the affordable-housing segment.

On the other hand, growth in telecom, information technology (IT) and pharma sectors will remain subdued. Therupee’s appreciation and pricing pressures will continue to affect export-linked sectors, such as pharma and ITservices. While pricing and regulatory pressures from the US will remain, new product launches and improvingdomestic demand (primarily benefiting mid-sized and small formulation players, such as FDC and Pfizer), willlimit the damage. The competitive intensity in telecom industry further intensified since January 2018 after thenew entrant started passing on the benefits of cut in interconnect usage charges to customers through lowertariffs.