Sales to pick up in next 6 months; earnings, investment to stay muted: ASSOCHAM Bizcon Survey

India Inc hopes to see better sales volume and improved capacity utilization in the next two quarters but does not expect any uptick in investment and corporate earnings even as the overall macro situation would change for better, according to an ASSOCHAM Bizcon Survey.

The Bizcon Survey, capturing the reading of the economy as also the firms at the individual level in December,2015 noted that 62.5 per cent of the respondents felt the state of economy would be better in the coming six months, although not much has changed in the past six months .

Lack of investment appetite in the private sector in the backdrop of lower capacity utilization, excess supply and continuous pressure on profitability are the areas of concern, for the next few quarters.

In terms of the domestic investment, 58.3 per cent felt that there has been no change in the investment plans at the level of individual firms. The sentiment seems to remain muted, going forward with 62.5 per cent respondents of the view that January to March 2016 quarter would not see much change in the investment levels. Thus there seems to be a continuing lack of appetite for new investment in the private sector, the Bizcon Survey said.

ASSOCHAM Secretary General Mr D S Rawat shared the concerns brought out by the respondents in terms of pressure on profitability and lack of investment. Global deflationary situation creeping into India in several sectors is hitting investor sentiment. The consumer confidence can return only if there are more job opportunities through higher investment into productive areas of the economy like construction, infrastructure and manufacturing. The lead, has to be taken by the government which has an onerous task before itself along with financial sector regulators like Reserve Bank of India and SEBI to ensure investor confidence in the markets which can then feed the investment climate.

Broadly in line with the macro picture, the Bizcon Survey also found similar state of affairs at the industry level, which is however, maintaining a sense of hope and optimism for the short to medium terms, at least in projecting better sales volume and capacity utilization.

Respondents seem to be highly optimistic with regards to their firm's future performance as 70.8 percent feel that they will be in a better position in the coming six months. As many as 41.7 per cent of the respondents felt that there is a decline in the sales volume during October to December 2015 while expecting better sales volume during January to March 2016 as 45.8 percent of the respondents expect that their sales volume will increase in future. . In terms of the future capacity utilization expectations, 66.7 per cent share the opinion that the industry will be engaged at higher levels.

In terms of cost of credit majority of the respondents (54.2 percent) said that there was no change in the cost of credit during October to December 2015. This is slightly surprising considering the fact that the monetary authority has reduced the policy rates. The possible explanation to this could be that the benefit of the rate cuts is not being passed onto the industry appropriately. However, the industry also feels that there is no possiblility of decline in the cost of credit as 54.2 percent believe no change in shorter horizon.

Whether raw material prices have increased or not in the October to December 2015 quarter, 33.3 per cent said there has been a decline in these Moving ahead as well 37.5 percent of the respondents believe that there will be decline in the raw material prices during January to March 2016 quarter. Ironically, it has not resulted in better margins and improved earnings as consumer demand remains muted.

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