India lags emerging markets pack in earnings surprise

More than half the companies in each of the major emerging markets (EMs) have announced their September quarter earnings. As a pack, the EM and Asia-Pacific (excluding Japan) region has managed to beat Street expectations. The MSCI EM and Asia Pacific (ex-Japan) index this year gained 32 per cent and 27 per cent, respectively. For the rally to sustain and valuations to remain in check, it is critical for companies in these regions to meet earnings expectations. 

Morgan Stanley has analysed companies that have positively surprised the Street. According to the brokerage, China has seen the strongest earnings surprise, with corporate profits exceeding estimates by eight per cent. Mexico has disappointed the most, with profits 14 per cent short of expectation. India is among the nations that missed on expectations. Profits in the domestic market fell three per cent short of estimate. Hopes are high on India, second-best performing market among EMs. Analysts say earnings will have to pick up sharply over the next two quarters if India has to attract higher foreign flows and sustain the year’s rally.