The Hindu Business Line : Market View

We have been highlighting the risk of possible earnings downgrades from several sectors over the past four months. Over the past month, this process has been firmly underway and appears to be gathering momentum. To an extent, the downgrades are a consequence of the overly optimistic levels to which revenue and earnings growth forecasts had been raised. This trend of buoyant forecasts was despite clear indications, for more than nine months now, of the likelihood of the economy growing at a slower pace. Inflation has become an additional factor with the potential to impinge on the performance of a sizeable part of the manufacturing sector. It appears quite likely that India Inc will close FY 2009 and possibly FY 2010 with growth rates that are likely to be in the mid-teen territory. This will represent a reversion to close to the long-term average. Coming on the back of average growth of about 30 per cent between fiscal 2003 and 2007, this may not be such a negative. What it indicates is that we are also likely to witness equity prices tracking earnings growth more closely unless there is a gush of liquidity to take them out of sync with fundamentals.

Sundaram BNP Paribas Mutual

Most of the corporate results that have been declared till now are in line with consensus expectations. IT, telecom and private sector banks have delivered ahead of expectations while capital goods and cement companies lagged behind. It remains to be seen whether this trend of actual results meeting expectations would continue over the rest of the reporting season. India’s breakneck economic growth has put strains on its capacities resulting in inflationary environment in the country. This coupled with sky-high prices of global commodities has exacerbated the impact on inflation. As corporate capex cycle progresses and infrastructure spending rises, not only will they generate employment, the capacity constraints would ease and inflation would subside.

Birla Sunlife Mutual

Asia is a safe haven from the world economy because its consumer, corporate, banking and government balance sheets are not dangerously leveraged. The rate of regional economic growth will slow for a period, a reflection and the downside of the phenomenon of globalisation. A slowdown however should not be construed as a recession either. Earnings forecasts for Asia have only declined 4per cent since November. This flies in the face of what economists are saying and expecting. It is therefore with some justification that we expect significant and widespread downward revisions of earnings.

ING Orange View

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