India's recovery hopes set to founder on gloomy results period An iron ore mine at Chitradurga in southern India. Mining is one of the industrial sectors expecting poor results Hopes for a speedy recovery in Indian earnings are dimming as Asia's third-largest economy faces up to another bleak results period, undermining predictions that the country's corporate sector would begin to rally in the second half of 2013. The earnings period for the April to June quarter, which begins with figures from the bellwether technology outsourcer Infosys, is likely to see only small increases in revenues across India's largest companies, with especially weak performances expected in industrial sectors including mining and construction. IN Industrials "As of now things are looking pretty grim, and much worse than they looked like three months ago," said Sanjeev Prasad, the head of institutional equities at Kotak, a broker. There is no evidence of a recovery anywhere, either on the consumption side in areas like autos or in the investment cycle. India's economy grew at just 5 per cent in the past financial year, a decade low, while the International Monetary Fund this week reduced its growth forecast for this financial year to 5.6 per cent, a cut of 0.2 percentage points, undermining government hopes for a swift rebound. Projections from Crisil, an Indian rating agency, suggest that this weak demand will see the country's largest listed companies post average revenue growth of between just 5 and 6 per cent during the coming quarter, compared to 17 per cent for the same period last year. The figures exclude oil companies, whose revenue is often distorted by subsidies. "I would say this is below expectations, and if you'd asked me six months ago I'd have said we hoped things would be better by now," said Prasad Koparkar, a senior director at Crisil Research. It might not look bad, but in the Indian context 5-6 per cent is terrible growth. Until the middle of 2012 we had been growing at 18 per cent or so for a long time . . . In real terms it means companies are hardly growing at all. Corporate India's profitability is likely to prove to be even worse, with projections from Morgan Stanley suggesting net profits for businesses on the Bombay Stock Exchange's Sensex index of leading shares, again excluding oil companies, are likely to fall by 1 per cent in the quarter. "Everyone said this recovery was going to be U-shaped, but now everyone has realised that the bottom of this U is going to be very extended," said Nick Paulson Ellis of the brokerage Espirito Santo in India. And if you strip out a few particular companies in certain sectors it starts to look a lot worse. Private banks and some of the consumer companies are delivering, but metals and mining, industrials and real estate have all been performing dismally. The decline in the rupee, which has fallen by about 9 per cent against the US dollar in the past three months, provides one reason for optimism as it potentially boosts major Indian exporters, including the country's IT outsourcers and generic pharmaceutical manufacturers. However, the same trend is likely to harm import-dependent sectors, notably many of those in sectors already badly hit by India's industrial slowdown, including automobiles and construction.