India's Q1 Earnings Cheer May Not Last: Experts Warn of Inflation Headwinds
India's stock market has been struggling this year, but Q1 earnings results offered some relief. The MSCI India index is down 2.6% so far in 2023, making it the least-favoured stock market in Asia, according to a BofA Securities fund manager survey.
The June quarter corporate results saw cyclical tailwinds from tax cuts and monetary easing through liquidity infusion and benign interest rates help. Nifty 50 companies reported 4% year-on-year earnings growth, exceeding consensus estimates by 1%, said Nomura Global Markets Research.
Excluding oil & gas, which was a significant drag due to losses booked by oil marketing companies, normalised earnings for this universe grew 20% year-on-year, surpassing Bloomberg consensus estimates by 5%. Normalized earnings growth measures the increase in a company's profit over time after removing unusual, one-off or temporary events.
Uncertainty over the West Asia war is likely to keep crude oil prices volatile. Sectors such as chemicals, paints and cement now face the full impact of crude-led commodity cost inflation, blurring profitability prospects and limiting the scope for steep earnings upgrades.