Major Indian companies report lowest quarterly results in 4 1/2 years, some say economic slowdown is a factor

On November 11, the financial results of major Indian companies for the period July-September 2024 fell to the lowest quarterly level in the last four and a half years, and there is a growing perception that the economic slowdown starting to affect corporate profits. Photo taken at the National Stock Exchange on October 22, 2024 (Reuters/Francis Mascarenhas)

[１１日 ロイター] – The July-September 2024 financial results of major Indian companies have fallen to their lowest quarterly level in four and a half years, and there is a growing perception that the economic slowdown is starting to affect profits physical.

This is the lowest level since January-March 2020, when the new coronavirus outbreak occurred. Only about 20% of the 50 companies in the NSE index beat market expectations.

According to analysts at Jefferies and Bernstein, financial results were reduced by government spending cuts from the April-June period of 2024, which was extended to the July-September period due to the general election, and higher water than the average.

The Indian stock market is down about 8% from the all-time high it closed on September 26. October was the lowest monthly rate since March 2020.

The sell-off was also fueled by foreign investors exiting investments in India following China’s recent economic stimulus package.

Indian financial institution Motilal Oswal Financial Services said, “Indian stocks are likely to be volatile at this time.”

Increase in earnings of Nifty 50 companies in India

According to Jefferies, of the 121 companies that have announced their financial results for the period July-September 2024, the number of companies that revised their profits down was the highest since the period April- June of 2020.

On the other hand, Motilal Oswal reported that the profits of 166 companies covered in the report fell by 8% in the period July-September 2024, the worst rate in 17 quarters. It is estimated that the number decreased by 4% in the period April-June of 2024.

Bernstein said that investors view the weakness of the past few months as an anomaly after a long period of strong growth.

India’s Nifty 50 is recording its worst monthly performance since March 2020

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Bernstein said that the effects of the monies and the general election were only one factor; “broader indicators such as the index of industrial production, eight major industries, car demand, and diesel consumption are showing signs of economic decline.”

The rate of increase in September’s industrial production index compared to the same month last year was the lowest in eight months, while gross domestic product (GDP) growth for the April-June period slowed to 6.7% compared to the same period last year.

Bernstein has cut its forecast for year-on-year profit growth for the July-September period for the top 100 stocks to 0.6%, down from its previous forecast of 9%. The full-year forecast of a 10.2% increase from the previous quarter was maintained.

Brokers’ view of India’s quarterly earnings season so far

Venkatesh Balasubramaniam, managing director and joint head of research at JM Financial, said weak first-quarter profits were not enough to signal an economic downturn, saying it was “too early” to tell. He said, “It is possible that the government’s capital investment will come back in the second half of the year.”

Jefferies said the cyclical economic slowdown was reflected in the slowdown in profits, and said it expected a recovery in the second half of fiscal 2025.

It said government capital spending fell 15% in the first half of the year, but was expected to rise 25% in the second half, partly due to unseasonal weather, supportive profits and a stock market recovery.

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Hritam reports on Indian companies with an additional focus on property and infrastructure companies. He previously worked as an India reporter with two US-based Vermont newspapers. He is an alum of Indian Institute of Mass Communication, New Delhi and St. Xavier, Kolkata.