Corona impact: Worst Indian profits in a decade baffle experts

Companies are running into losses, but analysts aren’t complaining. For, they are glad that amidst the corona mayhem, India’s top companies posted the worst profit decline in at least 10 years.

While the aggregate net income of 47 Nifty 50 Index members dropped 40% in the second quarter ended June from a year ago, nearly two thirds of these companies met or exceeded estimates, states a Bloomberg compilation.

Abhimanyu Sofat, head of research at IIFL Securities Ltd, told Bloomberg, “To be honest, we had written off this quarter, but majority of the Nifty companies have come with better-than-expected results.”

Indian market did better when compared to other major markets because Indian companies slashed costs to save cash. Lower expectations or reduced estimates ahead of the results season also made it easier to beat the Covid blues.

Besides, optimism about the future had its mark on the statistics. “Corporate earnings will recover in 2022, and the market is looking at that is my sense,” said Sumeet Rohra, a fund manager at Smartsun Capital Pte in Singapore. “Pockets of the market have huge potential.”

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In the current scenario though, 2021 offers a bleak prospect. “Even if things improve in the remaining quarters, full year FY21 will look flattish at best, with risks tilted toward the downside,” because of rising virus cases and some states battling a second wave of lockdowns, said Gautam Duggad, head of research at Motilal Oswal Securities Ltd. in Mumbai, told Bloomberg.

Three Nifty 50 companies including Coal India Ltd., Oil & Natural Gas Corp. and Zee Entertainment Enterprises Ltd. are yet to report results. The regulator has extended the timeline for reporting June-quarter earnings till September 15 amid the pandemic.