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Friday, October 30, 2020

Q2FY21 earnings: Faster-than-expected uptick in some key sectors, but miles to go

Activity data suggest the economy is on the mend and that the recovery is somewhat faster than anticipated. Auto sales, railway freight and manufacturing PMI all reflected an uptick in activity in September after a slower pick-up in July and August.

By: ENS Economic Bureau | Mumbai | October 12, 2020 6:00:42 am
September quarter earnings, Q2FY21 earnings, India’s GDP growth rate, indian economy revival, Indian economy, economy news, Indian express newsAuto sales, railway freight and manufacturing PMI all reflected an uptick in activity in September after a slower pick-up in July and August. (File)

India Inc is expected to have staged a fairly good recovery in the September quarter after profits plunged 83 per cent year-on-year (y-o-y) in Q1FY21, a quarter in which India’s GDP contracted 23.9 per cent y-o-y. The numbers must be viewed against the high base of Q2FY20 when corporate tax rates were cut.

Activity data suggest the economy is on the mend and that the recovery is somewhat faster than anticipated. Auto sales, railway freight and manufacturing PMI all reflected an uptick in activity in September after a slower pick-up in July and August. Exports revived in September, rising 5.3 per cent y-o-y reversing the negative 12.7 per cent y-o-y slide in August; analysts said exports were back at close to 98 per cent of normal levels. However, subdued domestic demand left core imports weak.

Business activity was better in August than in July though the sequential pace of the improvement slowed slightly across the board and there was a drop in the industrial sector. Nonetheless, Nomura’s India Business Resumption Index (NIBRI) rose to a new post-lockdown high of 82.3 for the week-ending September 20. Economists at the brokerage observed the mobility-driven surge in the NIBRI suggested lockdown fatigue was causing consumers to disregard pandemic concerns. They estimate GDP would have contracted by 10.4 per cent y-o-y in Q2FY21.

Retailing, capital goods,consumer durables, real estate and healthcare would have been the worst hit while IT services electric utilities, consumer staples and pharmaceuticals would have fared relatively well. While a section of the bigger companies would likely have bounced back, many others would have struggled to stay afloat. FE

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