Corporate India’s performance in Q1FY17 was expected to report a pick-up in the top line compared to the March 2016 quarter. But that did not happen due to a disappointing show by many sectors, including information technology, pharmaceuticals, metals, public sector banks and some capital goods. Select fast-moving consumer goods companies also witnessed muted volume growth.

Sales of 1,123 companies, excluding oil and gas and financials, grew 8.5 per cent in the June 2016 quarter compared to the corresponding period last year. The growth is similar to that in the January-March 2016 quarter, according to data provided by Capitaline. Helped by savings in input costs, better operational performance and stable interest rates, adjusted net profit grew 15 per cent y-o-y. This is, however, less than the 18 per cent witnessed in the March 2016 quarter.

“Our analysis of the usual operating parameters for 1QFY17 results show continued weak trends in credit, consumption, investment and non-performing loans. Net profits are slightly ahead of our expectations but largely due to non-operating factors in the case of several companies like non-interest income in the case of banks or lower depreciation rate, higher other income, among others, for non-finance companies,” said Kotak institutional equities in a report.

Sectors which did well were automobiles, cement, non-banking finance companies and private banks. Ajay Bagga, Executive Chairman, OPC Asset Solutions Pvt Ltd, continues to like these sectors while he is cautious about global markets’ linked sectors.

With the festive season around the corner, a normal monsoon and Pay Commission arrears coming in by this month-end, there is hope that things will recover in the second-half. Dharmesh Kant, head-retail research, Motilal Oswal Securities, expects an earnings upgrade for FY17 on an overall basis.

But companies will have to grapple with the lag effect of a rise in commodity prices and inflation rearing its head again. “The market is discounting too much of a recovery. There could be some disappointment and growth will take time,” Bagga said.

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