Bright spots: India and Indonesia, shining stars in earnings constellation

India and Indonesia have emerged as the bright spots in the Asian pack during the December 2023 quarter earnings season.

According to an analysis conducted by Nomura, of the 78 companies that are part of the Morgan Stanley Capital International (MSCI) India Index, 35 have exceeded Street estimates, 25 have fallen short, and earnings for 18 companies have met expectations.

These 78 companies account for three-fourths of the weighting in the MSCI India Index and 15.6 per cent in the MSCI Asia Ex-Japan (AxJ) Index.

Nomura’s analysis reveals that India’s beat-to-miss ratio stands at 13 per cent, second only to Indonesia, which is at 38 per cent.

India, however, holds the second-highest weighting in the MSCI AxJ Index at 21.1 per cent, while Indonesia’s weight is just 2.2 per cent.

China, with the highest weighting, has a beat-to-miss ratio of minus 19 per cent, with 26 companies surpassing expectations and 45 falling short. However, only a quarter of its companies have reported numbers thus far.

South Korea, the third-largest weight, has a beat-to-miss ratio of minus 25 per cent.

For the overall MSCI AxJ Index, the ratio is minus 11 per cent.

“Overall, more misses than beats, and therefore consensus earnings downgrades. But some bright spots too, such as India, Indonesia, and the Philippines. Our analysis shows that companies that beat numbers were rewarded by the market, while misses were penalised,” said a note by Nomura.

Following the December quarter earnings, India has witnessed modest upgrades in consensus profit estimates for 2024-25, driven by companies like Tata Motors, Sun Pharmaceutical Industries, Cipla, and Bharat Electronics. However, HDFC Bank, Bharti Airtel, Bajaj Finance, Titan Company, and ITC have experienced consensus profit downgrades.