After a superlative show in FY21, the best in a decade, in which it has overcame large supply-side disruption, Corporate India is well-placed to turn in a good performance in the current year too.

It may not have been a great start, however, given the localised lockdowns and curfews through much of April and May.

The high frequency data for the April-June period are mixed; PMI prints for both manufacturing and services have been poor, auto sales subdued, credit growth anaemic, employment weak while the volumes of GST e-way bills have been encouraging and exports exceptionally strong.

Commentary from consumer-oriented companies suggests business was better in June after a sedate April and May.

Sales may stay dull for the September quarter too but should pick up thereafter as the festive season sets in. As economists have pointed out, pent-up demand post the second wave is expected to be a lot more subdued than it was post the first wave. That said, there is a fairly large cohort of consumers who are insulated from the pressures of the pandemic and who have considerable purchasing power. Incidentally revenues for a set of 1,995 companies and banks fell 3 per cent in FY21, so there is a helpful base effect.

However, with costs having come down sharply last year, it is not clear how much more expenses can be trimmed. For one, elevated commodity prices will push up the raw materials bill for user-industries. It might not be easy for all companies to pass these on to consumers at a time when high inflation is already hurting household budgets. Consequently, operating margins might not expand as anticipated. Fortunately, most companies have deleveraged themselves so rising interest rates should not add much to costs.

Given how Q1FY21 was a complete washout, this time around it would be more relevant to compare the numbers for Q1FY22 with those for the March, 2021 quarter.

Kotak Institutional Equities (KIE) expects net profits for the universe of companies that it tracks to increase 152 per cent year-on-year but on a sequential basis it expects profits to fall 11 per cent, due to lower volumes and and higher raw material costs. Almost all sectors are expected to do well led by IT, banks and producers of metals.