Their economics team recently cut its global growth forecasts by about 0.40 ppt after factoring in the potential impact of the Covid-19 virus, Abhiram Eleswarapu, Head of India Equity Research at BNP Paribas, tells Moneycontrol’s Kshitij Anand in an interview.
Q) Coronavirus concerns are mounting and if the situation escalates, do you think it will have a lasting impact on the Indian economy and India Inc’s earnings?
A) Our economics team recently cut its global growth forecasts by about 0.40 ppt after factoring in the potential impact of the Covid-19 virus. But, they have left their forecasts for India unchanged on the assumption that the contagion abates relatively soon and remains limited outside China.
The good news is that the recovery ratio (ie daily recovery versus confirmed cases) has been improving over the past week and is suggesting a turning point in the spread of the disease, assuming, of course, that there is no resurgence because of workers returning from holiday.
While India may not be impacted much at an overall level, we know several sectors have supply chain linkages to China, especially pharma, autos, and electronics.
It wouldn’t be surprising if companies in these areas see their 4QFY20 results being adversely affected by this.
Q) What is your take on the December quarter earnings? Are there any green shoots?
A) Overall the 3QFY20 results were lacklustre, with earnings growth for our coverage being flattish y-y, excluding financials. Most management commentaries were either neutral or remained cautious. This underscores our view that any recovery later this year would likely be a mild one.
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