Downgrade risks surge for earnings outlook on oil, rupee


Downgrade risks surge for earnings outlook on oil, rupee

The rupee’s longest rout since 2000 and oil’s surge to a four-year high have put earnings estimates of Indian companies at the risk of downgrades.

Analysts have boosted the average profit forecast for NSE Nifty 50 Index companies by 9.2 percent this year, shrugging off a 12 percent slump in the gauge since August. But history suggests the divergence won’t extend for long, and the growing stress in Asia’s third-largest economy may soon translate into lower projections.

Not that a weaker rupee is bad for all Indian companies — exporters including software producers and drugmakers will gain in local-currency terms.

Still, the net impact on the broader corporate sector may be negative because of higher import bills. Add to that the tighter local-funding conditions, and profit estimates begin to appear optimistic. Read More

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