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Rough weather ahead for India Inc

Rough weather ahead for India Inc

The earnings season gives indications that corporate India might find the going tough in the next few quarters, says Vikas Khemani, the Head (Institutional Equities), Edelweiss Securities.

This earnings season has not fully reflected the changed environment but offers a lot of indicators on what is in store. Approximately 60 per cent of the companies that have declared results have either met or exceeded analysts' estimates and 40 per cent have negatively surprised the market. So, why then are the markets not cheering this earnings season? One of the main reasons could be that it does not fully reflect the changing macroeconomic conditions. Yet we get a sense of what to expect in the coming quarters.

The key takeaways are rising input costs and a slowdown in order book accretion. Although volumes have remained stable, margins have definitely come under pressure in many sectors. However, I feel that the full impact of rising input costs is not yet reflected because of inventory gains. Typically, companies keep two to four months of raw material inventory which helps them if prices go up in the short term.

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Published on: Feb 16, 2011, 3:02 PM IST
Posted by: Navneeta N, Feb 16, 2011, 3:02 PM IST