The backdrop for the June quarter results season is anything but bright. A tri-annual survey conducted by IHS Markit in June said optimism among Indian companies regarding output and profitability has further faded.

“Predictions of softer activity growth underpin downward revisions to the profits outlook, subdued hiring plans and relatively muted capex intentions," said the survey report.

The scenario is not much different across the globe, which is largely a consequence of the trade tussle between the US and China.

IHS Markit’s global business outlook survey for June showed that worldwide business optimism relating to future output and profits slid to its lowest since 2009. “Profits gauges are down to new survey lows in both manufacturing and services, with the latter indicating especially weak optimism," it added.

Region wise, profit expectations in the US fell sharply to the lowest since late-2016, accompanied by a weakening of hiring intentions. Profit expectations in the UK meanwhile stayed close to February’s post-recession low, and slipped to a six-year low in the eurozone. In the emerging markets, companies reported the bleakest outlooks for profits, employment and business investment seen since 2009.

Commenting on the survey, Chris Williamson, chief business economist at IHS Markit, said: “Not only does the survey indicate a further weakening of global economic growth in the second half of 2019, but companies are expecting profits to be especially hard hit, which is leading to a pull-back in both hiring and business investment around the world."

“The big change since earlier in the year has been a marked deterioration of optimism among US companies, alongside a slide in business optimism in China, indicating how trade war tensions are hurting both economies," he added.

For India, analysts said the growth slowdown that started a couple of quarters ago is expected to broaden. In addition to rural stress, demand disruption due to the general election is a key reason.

Brokerage house Motilal Oswal Financial Services Ltd said that risks to earnings remained tilted toward the downside, given the still weak underlying demand scenario and lack of private capex recovery. “The earnings growth recovery in FY20 is likely to be narrow and predominantly led by financials, even as global cyclicals drag and consumption-oriented sectors post deceleration in earnings," added its earnings preview report.

“Margins could continue to remain under pressure (negative operating leverage, rising input costs, rising competition, etc), despite low reported inflation," Emkay Global Financial Services Ltd said in a report on 9 July.

Meanwhile, the recent Union budget did little to address concerns on growth. Contrary to investors’ expectations, no big-bang stimulus was announced to boost consumption. With that, the onus to revive the economy has shifted to the Reserve Bank of India, which is expected to cut rates. That said, the challenge on transmission of interest rate cut remains, leaving little hope for a quick turnaround in the economy and thereby corporate earnings.