The first lot of financial results for the quarter ended December offers hope that corporate earnings are set to rebound. They cover sectors such as consumer goods, telecom, banking and petrochemicals. It is well known that the initial announcements are often at odds with the final tally of the entire universe of listed companies, so what happens now needs to be closely watched.
Indian equity prices have been lifted by a deluge of global as well as domestic liquidity, but this has been based more on hope rather than on an actual improvement in profitability. The December quarter results are important for a market that seems to be overvalued on the basis of historical earnings.
There are other worries as well—ranging from the sharp rise in global oil prices to the prospect of US interest rate hikes. So, the rebound in earnings growth—as part of a broader recovery in economic growth—is essential if investor hopes are not to be dashed in the months ahead. It remains to be seen if the movie is as good as the trailer.
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