Profits under pressure

Earnings growth will be a constraint for markets

The macroeconomic situation is improving, going by the latest gross domestic product (GDP) estimates and inflation prints. The inflation rate has declined, while GDP has grown faster than expected. However, the extraordinary profit margins of the Covid period are normalising and slower earnings growth could lead to valuation downgrades for equity. The 2022-23 (FY23) results of some 900 listed companies indicate net profit growth declined for most sectors, except financials. The aggregate net profits of a sample of 907 listed companies, which are constituents of the BSE500, BSE MidCap, and BSE Small Cap indices, grew by just 4.6 per cent