The fall in industrial output for the first time in 15 years is expected to result in companies reporting lower earnings in the third quarter ending Decmber 31, 2008 as well as in the following quarter ending March 31, 2009.
The core industry sectors including manufacturing, infrastructure and auto are expected to continue to register a decline in growth in the coming two quarters, industry analysts and experts said.
"IIP is an indicator, and the trend is clear that the companies' performance in the next two quarters would be bad,” said Hitesh Agrawal, Head of Research, Angel Broking. “We are not expecting any positive surprise neither in the December quarter nor in the March quarter.”
Rohini Malkani, economist, Citigroup India, said “Incremental data, both on the global as well as domestic front, continue to come in worse than anticipated. While the government’s fiscal stimulus package and monetary measures are positive, they are unlikely to reverse the slowdown in growth, and downside risk (to Citigroup’s GDP growth estimates of 6.8 per cent for 2008-09 and 5.5 per cent for 2009-10) appear to be increasing.”
Malkani said a key worry is the contraction in consumer goods — both durables and non-durables — which suggests that the around 7 per cent growth seen during previous years may not sustain in 2008-09 and 2009-10.
“The weakness in the economy is very much evident and it will remain bad for the next four to five months,” said Dev Kapadia, chief dealer, Lalkar Securities. “The negative IIP numbers were as per the expectations and were already factored in.”