Indian organisations are now opening up and yielding their best earnings results since Prime Minister Narendra Modi of the new government swept to power. This is the clearest sign yet that India’s fast, but patchy, economic growth is getting more and more broad-based.
Though headline growth figures make India one of the world’s fastest growing economies, weak private investment and low capacity utilisation rates have painted a less rosy picture. Going by India Inc’s surge in profit growth in the first three months of the year, however, the outlook really does seem to be brightening, as benefits feed through from lower interest rates and government spending in infrastructure and defence.
Year-on-year growth of 7.5 percent is forecast by a Reuters survey economists, slightly faster than the previous quarter’s 7.3 percent. Operating profits for 289 companies that have reported results so far leapt 25.5 percent year-on-year in the March quarter, compared with 1.7 percent growth in the previous quarter, according to Thomson Reuters data.
It is Indian firms’ best showing since the April-June quarter in 2014. Put alongside the 6.8 percent decline in earnings that data provider Factset reckons companies in the S&P 500 suffered during the same quarter, India’s corporates have some things going in their favour.
National Stock Exchange(NSE) share index has surged nearly seventeen percent from a near two-year low in the first quarter , outperforming 7 percent gain by the Asia-Pacific MSCI index. These results are excluding the Japanese Stock Exchange. Furthermore, Morgan Stanley has upgraded Indian equities from “equalweight” to “overweight”, citing rising dividends, and prospects of lower interest rates, a simpler country-wide sales tax, and benign monsoon among some other reasons.