A sectoral analysis shows that the effect of the financial meltdown may not be as bad as it is being made out to be.
While in the quarter ended September 30, sales increased across most sectors, profit margins dipped. However, analysts say the situation is better than most
expected.
For instance, several companies in sectors like consumer goods, industrials and basic materials reported higher-than-expected growth in sales, an earnings analysis of 571 companies by news and data services agency Bloomberg showed.
Firms that reported better-than-expected sales growth outnumbered the others by 2.5 times.
“Banks, utilities, pharmaceuticals and metals did better than expected, while automobiles, capital goods, media, hotels and consumer businesses disappointed,” said Aditya Narain, an analyst at Citigroup, in an India strategy report.
Consumer goods and automobile firms had the worst growth in net profit, but this was expected because they are heavily dependent on loans, which are scarce and expensive.
For companies in the Bombay Stock Exchange 500 index, net profit margins fell to 12.2 per cent, a drop of only 1.9 percentage points from a year earlier, a Citigroup Equity Research note said.
Banks were a pleasant surprise, reporting a net profit of 1.5 times that expected by analysts.
Citigroup said profit margins continued to dip, but there were no nasty surprises and were largely in line with expectations. A full-blown recession in the US and Europe would hit export-dependent sectors like software, textiles and metals.