Early birds warn of a stressful Q3

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Subscribe to enjoy similar stories. A worrying trend is emerging for India Inc. as the third-quarter results trickle in.

Initial earnings suggest demand worsened in the three months through December, suggesting consumers further cut back on spending after a tepid second quarter. A Mint analysis of the first 200 companies that have declared their results shows a 1.5% year-on-year drop in their topline. That contrasts with the 9% annual revenue growth these companies reported in the September quarter.

Sequentially, revenue contracted nearly 7%. Consumption had slowed in the second quarter ended September due to minimal government spending, sticky inflation and sluggish wage growth—reflected in India’s GDP expansion cooling to a seven-quarter low of 5.4% in Q2.Investors hoped for a rebound during the festive and wedding season, but early numbers portend little relief ahead. “After Q2, (performance) expectations are not very high in Q3.

Earnings are generally expected to grow mid-single digits this season," said Hari Shyamsunder, vice president and senior institutional portfolio manager at Franklin Templeton Mutual Fund. “If earnings per share downgrades remain low, the market will gain more confidence on the sustainability of earnings going ahead." The banking, financial services, and insurance (BFSI) sector, which has long served as a reliable anchor for the corporate sector during uncertainty, is showing signs of distress. The topline for the BFSI cohort fell nearly 10% year-on-yearduring the quarter, while net profit growth slowed from 19.5% in Q2 to 14.7% in Q3.