"We expect corporate earnings to continue their muted growth trend in FY16. However, the downward trajectory may get checked to an extent, thanks to the proposed government spending," the domestic ratings agency said in a note today.
"There is no immediate economic trigger in the Budget proposals which will cause a turnaround of stressed or vulnerable corporates," it said.
A larger fiscal deficit is accompanied by greater profits, and vice versa, it said, adding that this is arrived at using economist Michael Kalecki's profit equation.
Factors which would moderate corporate earnings in FY16 are the disinflationary trend of moderating nominal GDP, reduction of accruals, and in some cases, even reversal of accruals by corporates as well as a marginal uptick in taxes in FY16, it said.
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The report said corporate earnings have not improved in FY15 as well, wherein earnings of Sensex companies have fallen by eight per cent.
Additionally, the window of restructuring of loans going off from April could persuade banks to take a decisive call on weak corporates that need to be restructured, it said, adding there would be a "significant spike" in the number of NPAs and restructured assets in the last quarter of the fiscal.