India Inc withstood multiple headwinds from the start of the fourth quarter of FY2021-22. If supply chain snags and soaring inflations were not enough, the Ukraine-Russia war worsened disruptions during the quarter.
The Street, too, is anticipating severe pressure on margins despite several rounds of price hikes taken across sectors. However, analysts expect Q4 performance to be resilient aided by the economic recovery.
Santosh Meena of Swastika Investmart, says the Indian economy is witnessing a strong revival – evident from the all-time high GST collections in March.
Meanwhile, according to Motilal Oswal Financial Services, the Nifty has not seen much earnings downgrade so far, thanks to upgrades in metals, oil and gas, and negligible impact in IT and BFSI sectors.
That said, if the input cost situation does not improve and price increases become inevitable, we are not too far away from some demand dislocation and earnings downgrade even for the Nifty.
Analysts, too, remain optimistic on India Inc for Q4. HSBC Global, for instance, projects FY22 and FY23 headline Nifty earnings growth at 37% and 19%, respectively.
It further estimates FY23 Nifty50 earnings per share growth at 18.9%. However, the brokerage has warned of high commodity costs, and says, “A prolonged period of high commodity prices can prove to be a double-whammy to corporate earnings due to decline in margins and lower demand, increasing the risk of earnings downgrades.”
A closer look reveals automobile and FMCG companies are among the worst-hit sectors. Their high input cost worries have been persistent for the past few quarters and the ongoing disruptions have only added to their woes.
Santosh Meena of Swastika Investmart expects cement, OMCs and city gas distributors to be the other laggards in Q4.
Against this backdrop, markets will be eyeing Q4 updates by companies on Wednesday, ahead of the results season.
The Reserve Bank of India will also begin its three-day monetary policy meeting later today, which could keep equities and bond yields volatile. Globally, investors will track FOMC minutes, progress on the Ukraine-Russia negotiations and Covid-19 cases in China.
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 "Will India Inc see robust Q4 despite input cost pressure?")
