1. Q2 review: Weak demand weighs on corporate earnings

Q2 review: Weak demand weighs on corporate earnings

Corporate earnings for the three months to September have been more than disappointing and the cautious commentary will compel analysts to prune their estimates.

By: | Mumbai | Updated: November 16, 2015 11:37 AM
Corporate growth

Corporate earnings for the three months to September have been more than disappointing and the cautious commentary will compel analysts to prune their estimates. (Reuters)

Weak demand across both urban and rural markets, in a slow-moving economy, continues to pressure India Inc’s profits. Corporate earnings for the three months to September have been more than disappointing and the cautious commentary will compel analysts to prune their estimates. Almost every Nifty 50 company has reported a fall in net profits. Kotak Institutional Equities has noted, “The underlying trends of volumes, order booking and NPLs indicate that economic recovery remains elusive.”

The key takeaway from results season would have to be Larsen & Toubro’s (L&T) lowered guidance for order inflows and revenues; the engineering firm has dropped projected order inflows to 5-7% for FY16 from 15%, in an indication investments remain sluggish. Low inflation has pulled down pricing even as volumes remain weak. While softer commodity prices have helped reduce raw material costs for two-wheeler manufacturers and car makers, companies aren’t able to improve top lines despite offering discounts to attract customers. Meanwhile, commodity players such as cement and steel firms continue to perform poorly as the real estate and construction spaces remain in a slump.

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