A steep drop in profits at State Bank of India rattled investors last week. There have also been mounting fears on the Street about the potential impact of production glitches at the KG-D6 gas fields on the profits of Reliance Industries. Earlier, Infosys and Wipro went through management rejigs at least partly in response to disappointing performance.
Each problem is unique to the specific firm, and will likely be overcome given the underlying strength of these businesses. However, these could be a warning of stress across the corporate sector over the next few quarters, as demand slows and input prices rise.
Much of the ongoing debate among investors is focused on the impact of higher interest rates on economic growth this year. There is enough reason for worry here as growth forecasts are pared. But less thought has been given to the challenges that lie ahead for companies. It’s time to pay some attention there as well.