Among the major sectors, capital goods and engineering companies are expected to account for the biggest jumps in earnings during FY07. Earnings growth estimates for power equipment companies such as Bhel range from 25-35per cent for the coming year. Engineering & construction companies are projected to record a 25-30per cent rise in earnings. Companies like Bhel and L&T have substantial order backlogs and, hence, there is a higher degree of visibility in sales and future earnings.

The earnings growth is expected to be modest for oil and gas companies. While profitability of oil marketing companies has been hit by high crude oil prices, ONGC and Reliance could post a modest increase in profits during the year. Reliance may benefit from higher gross refining margins in some of its major markets, particularly the US.

While Reliance is present in petrochem and petro-retail, refining continues to account for the bulk of its sales and profits. ONGC’s profitability is expected to improve on two accounts, a capped subsidy burden and improved production over the last year.

In the auto sector, the commercial vehicle segment is expected to show strong performance on the back of infrastructure spending. The top auto companies, Maruti and Tata Motors, are expected to clock a jump of about 15per cent in profitability. Projections for the first quarter remain robust because the market itself is expanding. Operating margins could flatten as expenses relating to product, brand and distribution all weigh in for the quarter. While the sector has shown strong sales so far during the first quarter, further performance is tied to the monsoons.

Earnings growth for the software sector is expected to be in the range of 25-30per cent. The steel sector could also spring up a surprise as prices are on the upswing and have seen a recovery of $100/tonne since the start of this year.