India tops emerging markets in negative earnings revision: Morgan Stanley

India has got the dubious distinction of topping the list of emerging market (EM) countries with the highest negative revision in earnings. According to an analysis done by Morgan Stanley, India's earnings revisions breadth factor has touched negative 70 per cent for the first time since 2001. 

This is also the highest negative score across all emerging markets with South Korea close behind. Earnings revision breadth is net earnings revision by total estimates. In the past four financial years, the actual earnings growth for Indian companies has undershot analysts’ estimates. 

During this time, the earnings growth for Nifty companies has been flat but consensus growth estimates for each year have been anywhere between 15 per cent and 20 per cent. 

Morgan Stanley says one of the reasons for such high negative earnings revisions breadth factor for India is high research coverage. 

“We attribute this to the high number of estimates available for Indian stocks. India ranks second among the number of stock estimates available in EM after China but ahead of Korea, with more than 2,000 estimates,” says the brokerage. 

India’s upward-to- downward earnings ratio is also not positive but has shown improvement, it points out.