Corporate results, operating profit of companies, excluding the banking and finance sector, fell 14 per cent in the second fiscal quarter, against growth of 35 per cent in the previous period, although the top line grew at a healthier pace, SBI Research said. led by Soumya Kanti Ghosh said in a note. Net sales were up 28 percent, while revenue was down 23 percent year over year.
Corporate margins also appear to be under pressure, as reflected in the results of around 3,000 listed institutions, excluding the banking and finance sector, due to higher input costs with reduced operating margins, at 17.7 percent in April to June 10.9 percent second quarter, SBI said.
Because of this and the wide difference to the market consensus (6.1 percent) regarding the second quarter GDP reading, the SBI is forecasting growth of 5.8 percent. It also expects full-year growth to be 6.8 percent, 20 basis points below the central bank’s target. Gross domestic product data will be released on November 30.
“Overall, a growth of 6% if it occurs in Q2 may mean that India is likely to expand below the benchmark of 7%,” Ghosh said. “However, we believe that there is a large disconnect between leading indicators and GDP growth since the start of the pandemic. Growth forces are still strong and it may be better to look at headline GDP numbers for a few quarters before jumping to conclusions. clear. the conclusion about the direction of growth.”
S&P Global Ratings on Monday cut India’s FY23 GDP growth forecast by 30 bps to 7 percent. For FY24, the forecast has been revised up by 50 bps to 6 percent. A Reuters poll showed India’s economy is likely to return to a normal annual growth rate of 6.2% in July-September after double-digit expansion in the previous quarter.
SBI’s Composite Futures Index (CLI) (a basket of 41 key indicators that includes parameters from almost all sectors) based on monthly data shows a slowdown in economic activity after June 2022 to September 2022. In October 2022, it signals a turning point. -Points with increasing economic activity make Q3 FY 23 GDP growth more optimistic, SBI said.