Where are the profits?

Unlike the jubilant markets, India Inc's performance for the quarter ended December has been dismal, with aggregate net profit of 2,941 companies shrinking nearly 17 per cent over a year ago.

Earnings of companies forming part of the Sensex, as well as broader indices like BSE500, were under pressure. Among the most notable trends was a weak show by information technology (IT) and pharmaceuticals, two sectors that had so far held up overall corporate profits quarter after quarter.

The IT sector's profit, for instance, grew by only four per cent, weakest since the March 2012 quarter. Even after adjusting for one-off gains by Strides in the year-ago period, the pharma sector's aggregate profit was down about a per cent, its weakest in five quarters. (DECEMBER QUARTER RESULTS)

The trend looks worrying, as the number of companies that fell short of expectations was much more than those that beat estimates, and that too across sectors - capital goods, metals and automobiles. Even fast-moving consumer goods, a so-called defensive play, saw its performance come under pressure. In contrast, banking did well partly due to a low base effect that helped State Bank of India post a strong rise in profit. Most private banks did well.