Mumbai: A review of earnings declared by the top Indian companies shows that around two-thirds of them missed sales forecasts, signalling that analysts are more optimistic than ground realities suggest and Asia’s third-largest economy has more distance to cover before it returns to a robust growth trajectory.

A Mint analysis of 161 companies on the BSE-500 index that have announced their September quarter results and for which Bloomberg analyst forecasts were available for net profit and sales—showed that 108 companies missed the estimates for sales. The remaining 53 beat sales forecasts.

Banks and financial services firms were excluded from this sample, and studied separately, as they follow a different earnings model.

“The economy is not entering the growth phase; only some companies in a few pockets are outperforming," said Deven Choksey, group managing director of KR Choksey Investment Managers Pvt. Ltd.

Two successive years of poor monsoon rainfall—and unseasonal winter rains that damaged standing crops—have dampened consumer demand in the countryside and hurt company sales, although urban consumption has shown signs of an uptick. Government efforts to revive stalled projects and kick-start the investment cycle have had limited success.

Companies that missed analysts’ forecasts for sales were concentrated in the consumer packaged goods industry, where all 13 that announced earnings fell short of consensus expectations, partly because they passed on lower commodity prices to consumers by cutting prices, largely motivated by a desire to spur demand.

Hindustan Unilever Ltd’s sales by volume grew 7% in the September quarter. Sales growth, in terms of value, came in at 4.7%, lower than the 5.3% in the June quarter.

Some of this had to do with the phasing out of excise duty benefits and some with price cuts taken during the quarter. The company cut prices on average by 7% in the soaps and detergents segment, which accounts for nearly 50% of overall revenue.

Out of pharmaceutical companies that have declared their September quarter earnings, 13 missed their sales forecasts, and seven fared better than expected.

Drug maker Lupin Ltd recorded a 36% drop in consolidated net profit for the quarter following a slowdown in product launches in the US market. The company’s profit and sales both fell short of Street expectations. In the auto and auto ancillary space, 13 of 16 companies missed estimates for net sales.

Three oil and gas companies missed sales estimates while only one beat expectations.

“Demand is not increasing, which reflects in sales. Since costs have come down, the aggregate sales are lower for oil companies," said market analyst Ambareesh Baliga.

“It is possible that we will see more earnings downgrades from here, as analysts’ expectations have been more optimistic than (a reflection of) reality," added Baliga.

On the profit front, things have looked better. Eighty-six companies beat analysts’ profit estimates; 75 fell short.

“It is a good sign that a major chunk of companies have shown outperformance on profit side. This is a good trend which may only improve from here," said Choksey.

Much of this had to do with sliding commodity prices.

“Profits could have been better than expectations because of reduction in input costs," said Baliga.

Software services firms surprised investors, with 14 of 16 companies beating expectations for net profits.

For the July-September period, Infosys Ltd’s net profit improved 10% sequentially to 3,398 crore.

A Bloomberg poll of 22 analysts had estimated that the company would post a net profit of 3,287 crore.

The earnings of banks and financial services firms presented a mixed picture. Of 36 banks and financial institutions that have announced their earnings, and for which net profit estimates were available, 20 beat estimates while 16 fell short.

Housing Development Finance Corp. Ltd, the country’s largest mortgage financier, reported a standalone net profit increase of 18.2% for the September quarter on strong demand for individual home loans, beating consensus estimates.

Many banks and financial companies are burdened by bad loans—a fallout of the economic downturn in recent years and delays in receiving government approvals and completing land acquisition that stalled many projects, crimping corporate cash flows and making it difficult for borrowers to repay debt.