Data compiled by ETIG shows that key commodity prices have come off their recent peaks.
While cement prices have fallen 11% from their peak in May, steel prices are down 20% from their highs in March.
International crude oil prices are down by a quarter from their peak levels first hit in March. Refined palm oil prices are 22% lower from May highs, while prices of ABS plastic have declined by a third from their peaks in November last year. Natural gas prices have slipped by 10% from early June highs.
“Core commodities prices such as aluminium, copper or steel have dropped and a reversal of 11 months of price hike in commodities is quite good,” said Anuj
, executive Director, .
However, crude prices will make an exponential difference and it is important that the government keeps a check on that and use levers to help consumer demand, he added.
“I feel that capex investments will take time to show recovery and a pickup in consumer sentiment will help better as our economy is largely consumption-led,” Poddar said.
Despite inflationary pressures, growth, though dented, has helped them stay the course, companies said. The corporate sector has been tackling headwinds from rising input and logistics costs impacting their earnings in the next few quarters. Geopolitical tensions are, however, expected to impact energy prices and input pressures, they said.
Corporates have, therefore, not changed their guidance on profitability for the coming months until the carry-forward of the existing inventory. Upbeat growth in one sector is compensating for the other, said Seshagiri Rao, joint managing director,
, and group chief financial officer. For instance, growth in the industrial sector, led by infrastructure and real estate, has been strong. The government’s (both central and state) capex programmes are progressing well, and India‘s services-led export has also been upbeat. Appliances and packaging sectors are doing well, while the FMCG sector has reported stress in volumes. With a good monsoon, agri-led businesses will pick up for the rural sector, he said.
“I feel RBI intervention to contain money supply to stop further inflationary pressures will also eventually help consumption-led growth. The geopolitical effect on energy prices and supply chain challenges though will remain since all global economies including India are interlinked and cannot be insulated beyond a point,” Rao added.
Consumption sentiment, companies said, have also improved since August. “I expect Q3 to show improved trends and already August is showing improved growth as the festive season started early this year,” said Poddar of Bajaj Electricals. Top executives said inventories and contracts signed ahead for production means it will be another quarter before we see visible changes in prices at the retail level.
The top brass at companies have also detailed the drop in commodity prices on conference calls with analysts but have mentioned the lag impact which will benefit margins and demand.
“If a commodity like palm oil remains at the lower end as we have seen it coming off and if at all we do see that across many other commodities, then we do expect that from the December-quarter onwards, inflation may come off to some extent. And that should help sequential margin being built from December quarter onwards,” said Ritesh Tiwari, chief financial officer,