India: How Low Can Earnings Go?

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A report by Citi tries to make this interesting point - how low can corporate earnings go in India? The chart shows relation of overall corporate earnings to IIP. In 1997-99 slowdown, corporate earnings growth touch 0% to slightly negative twice. In 2001, corporate earnings will come down to -14%.

While the report does not make any forecasts, (brokers dont like negative numbers, I guess), the inference is clear. While FY09 may be marginally positive (could be negative too, these two quarters will be down sharply), sometime by 1H10, the 12 month rolling figure should be negative. Whether or not FY10 as a whole will be negative, it is too early to say.

Eco Data

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FY10 forecasts are coming close to 5% range for India. (2009 is almost the equivalent to what we call FY10). Looks quite dismal everywhere except China.