Mumbai: The economy is sending mixed signals with the Q2FY16 profits and sales of the Nifty and the Sensex companies down, according to Emkay Global Financial Services Ltd.
It also paints a dismal outlook with exports down for the 14th quarter and service exports down, rural demand weak and asset quality issues and moderation in business growth continuing to weigh on the banking sector.
In contrast, Credit Suisse Research says, “Given the government’s focus on bottom-up growth rather than top-down, we believe the first signs of recovery are likely to come from broad-based indicators. Good growth in oil, power and auto demand for two months points to a reviving economic momentum.”
The DBS Group research on India says that the broad-based approach to reforms remains in place despite the setback at the recent elections. “This should help to sustain optimism towards the government’s developmental agenda and provide medium-term boost to growth,” it said.
Dhananjay Sinha, head research, Emkay Global said the adjusted PAT for Nifty (excluding oil and financials) declined by 1.6 per cent year on year (yoy) as compared to 5.1 per cent decline in Q1. Sales declined by 5.5 per cent due to continuing weak demand, whilst the overall operating profit margin declined for Sensex and Nifty companies by 218 basis points and 1.49 per cent respectively despite declining commodity prices, drop in tax outflow and steep rise in other income 114 per cent and 100 per cent respectively.
On a more optimistic note, Credit Suisse points out that in October 2015 India’s oil demand grew 17 per cent yoy after September’s 15 per cent growth, plastics demand in India which supports naphtha consumption saw robust growth; bitumen rose 54 per cent over yearago period means road construction is doing well and power consumption rose in September and auto sales have also shown strength compared to prior trends.
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