India’s earnings have been falling and flailing (all over the place); for the first time in 6 years, Sensex earnings growth (ex-Oil) is -4.5%, wider CIR universe is -10% (includes oil down 58%), and the wider BSE500 index is down 16%. So, the wider the set, the deeper the pain. India’s nadir on earnings growth was -14% in 2001 (full year) – but the next year saw a 7% bounce-back. Currently, we are clearly not as optimistic – forecast -1% earnings growth in FY10.
Earnings and growth pressures significantly higher at the broader level. Sales for BSE-500 cos are up + 9% yoy (+38%, Sep08), margins are down 430bps yoy (though up 63bps qoq), and profits are down 16% (10%, ex-oils). Bottom-line – earnings/growth pressures are far deeper in the broader economy, than Sensex/CIR universe.
Banks (bond gains, and questions on quality), utilities and Pharma have done better than expected; but it’s a long tail of disappointments led by Capital goods, Real estate, Metals, Auto and energy.