As the earnings season draws to a close, it’s evident the demand slowdown is hurting badly. There have been few surprises and mostly disappointments. For a sample of 993 companies (excluding Reliance and TCS) profits were down 17% year-on-year. That’s because sales grew at a sluggish 5% y-o-y with companies across sectors — save IT — unable to grow volumes meaningfully.
Managements are not sure if demand would pick up soon but are hoping for a revival in the festive season. Volume growth has been tepid whether for two-wheelers or FMCGs and few companies have been able to demonstrate pricing power. The slower loan growth at HDFC and HDFC Bank indicates demand for credit is weak. There are also no signs to indicate the capex cycle may be turning.