The Indian corporate sector, which progressively returned to normalcy from the second quarter of the existing fiscal, is probably to sustain improvement in the third quarter, aided by powerful festive demand, says a report.
During the second quarter, sequential recovery from Q1 FY21 levels was visible across sectors as the lockdown restrictions eased. Some sectors had been even capable to bounce back to pre-COVID levels and post income development on an annual basis, Icra Ratings mentioned in the report.
“On the demand side, we expect that India Inc would gradually revert to normalcy and would be able to sustain improvements in Q3 FY2021, given the seasonally strong festive season,” the rating agency’s Vice President (corporate sector ratings) Shamsher Dewan mentioned.
Rural demand continues to be on a optimistic trend, supported by the regular monsoon, healthful crop outputs, and government assistance in the type of improved MNREGA allocations, MSME assure loans, amongst other individuals, he mentioned.
The recovery is anticipated to continue to be rural-led, whilst urban India would progressively catch up.
“Nevertheless, the sustainability of the recovery, post the ongoing festive season, would remain critical in determining the overall macroeconomic recovery trajectory,” Dewan mentioned.
However, he added that the occurrence of a second or third wave of pandemic can reverse the recovery in the absence of a vaccine so far.
Icra mentioned its evaluation of monetary outcomes of 587 organizations in the Indian corporate sector (excluding monetary sector entities) showed aggregate income expanding by 34.9 per cent in Q2 from Q1 levels, despite the fact that it remained reduced by 6.5 per cent on a year-on-year basis.
The margins as well have registered an improvement for the duration of the second quarter.
“Among consumer-oriented sectors, although large-ticket discretionary purchases like leisure travel and lifestyle retail continue to remain on the back-burner due to risk aversion and general uncertainty, the demand in several other sectors, including passenger vehicles, two-wheelers, consumer durables etc have bounced back over the past few months,” Dewan mentioned.
Essential goods like FMCG and customer foods had been not impacted materially even in the midst of the lockdown and continue to stay so.
Commodity-oriented sectors such as cement, iron and steel and metals and mining sector also reported sequential and y-o-y recovery, supported by firming up of commodity costs as properly as volume expansion and aided by a choose-up in industrial activity, the report mentioned.
Industrial and infrastructure-oriented sectors, on the other hand, whilst exhibiting sequential recovery, are but to attain their year-ago levels, and contracted by 11 per cent and 14 per cent on an annual basis respectively for the duration of the second quarter.
It additional mentioned some sectors like aviation and hotels continue to face challenges, which are anticipated to persist more than a prolonged period.
The hotel sector continues to grapple with historically-low occupancy levels, regardless of some quarantine-connected and healthcare employees targeted traffic diverted to hotels.
“Accordingly, recovery in these sectors is likely to be a longer-term phenomenon, given the discretionary nature of spend, and customer wariness that is likely to continue till a vaccine is made available commercially,” the agency mentioned.