Q3 preview: India Inc to see a smart rebound

Driven by festive fervour, pent-up demand, sharp cost cuts and regulatory breaks, corporate earnings for the three months to December 2020 are expected to rebound smartly.

With very little of the country now under a lockdown and business activity picking up nicely, companies, across the board, should report good revenue growth, better than in Q1 and Q2FY21. Sectors such as capital goods are expected to have seen a rebound in order inflows and also execution.

High frequency data suggest a somewhat uneven recovery with volumes falling in one month and rising in the next. However, certain products, two-wheelers for instance, may not have fared well in the home market but have done well in the export market.

Again, while domestic demand for steel remained weaker than in the October-December 2019 period, steelmakers would have benefited from a rise in prices and should report healthy margins. Retailers, too, should have done well, cashing in on the festive demand as also the wedding season with the store hours having been lengthened. In general, retailers have reported a gradual recovery in footfalls.

While the December quarter is a seasonally weak one for IT players, this time around it was better than usual, thanks to the ramp-up of large deals, strong momentum in digital spends and lower-than-expected furloughs.

While banks seem to be confident slippages in Q3 would not have been very high, it would be difficult to get a clearer idea of how much stress has piled up in the nine months to December since lenders were given relief on NPA classification.