The economic growth has slowed down to six per cent levels from nine per cent in 2007-08. Even the industrial production index is also down. But Cassandras have been proved wrong at least on one front — corporate profits are expanding if the first quarter (April-June) numbers are any indication.

Thanks to cost-cutting measures and fall in interest rates, net profits of 2,900 Indian companies rose by 8.85 per cent in the first quarter as against the 4.19 per cent rise in the same period of last year. But demand has clearly taken a beating as is evident from the falling sales turnover of companies. As per the data collated by the FE Research Bureau, total income (including sales and other income) of companies fell by 4.21 per cent during the first quarter. In fact, corporate sales have been falling sequentially in the last five quarters.

India Inc has benefited from the falling interest rates that resulted in a lower growth in interest outgo at 21.37 per cent in the first quarter as against 33.60 per cent. On a sequential basis, first quarter is much better than the fourth quarter of 2008-09 when profits declined by 1.73 per cent. There’s no wonder the BSE Sensex has risen 88 per cent from a 2009 low in early March, and is up 57 per cent this year — the fourth-best performance in the world — after falling more than half in 2008.

“The earnings and profit number are better than expected. We had expected 11 per cent and 3 per cent degrowth in profits and earnings respectively in the Sensex 30 companies. To our surprise, there was only a 1 per cent degrowth in income while profits actually went up by 4.5 per cent. We have upgraded the EPS (earnings per share) of these companies by 5 to 6 per cent in FY '10 and FY '11. Out of our universe (the companies tracked by Angel Broking) of 160, there were very few misses. FMCG, banking, IT and automobiles were the sharpest gainers in our universe of companies,” said Angel Broking head of research Hitesh Aggarwal.

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