Corporate earnings for the September quarter were largely a mixed bag. Among key sectors, consumer-focused companies were aided by restocking post goods and services tax (GST) roll out and an early festival season, but index heavy-weight banks lagged, impacted by higher-than-expected provisioning.

Though many corporates are optimistic a revival in rural consumption and the abating of the impact of GST transition, confidence about a significant earnings revival is missing, analysts said.

As the accompanying chart shows, Bloomberg’s Nifty fiscal year consensus earnings per share (EPS) estimates have declined from where they were before the September quarter earnings season began.

“Indices have been rallying and valuations remain expensive despite the fact that fundamentally, things continue to be on a shaky ground. Ample and continuous liquidity pouring into the market especially via NFOs (new fund offers.) is driving the hope trade. The decline that one is seeing in Nifty earnings estimates signals the lack of confidence with respect to significant earnings revival. Going ahead, a key dampener for India Inc earnings is likely to come from rising oil prices," cautioned Sanjiv Bhasin, executive vice president (markets and corporate affairs) at India Infoline Ltd.

Apart from hardening commodity prices, risks to Nifty earnings growth also emerge from the lumpy slippages in the financial sector.

In short, despite the recent ratings upgrade by Moody’s and bank recapitalization, the threat of further cut in Nifty earnings estimates still looms.

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