Reading the Future of India's Economy

Reliance Industries, India's biggest company by market capitalization , on April 21 announced its fourth quarter and annual results. The company reported a net profit (excluding exceptional items) of Rs.15,261 crore ($3.8 billion) on annual revenues of Rs. 139,269 crore ($34.4 billion). "Reliance beats Street estimates," said Thomson Financial News. "Reliance misses estimates," said Bloomberg.

Estimates can, of course, vary. But, at a time when nobody seems to know how to read the future of India's economy, such mismatched interpretations of corporate performance just add to the confusion. "The market has decoupled from reality," says Nandan Chakraborty, head of research at financial services provider Enam.

It seemed so simple a few months ago when the BSE (Bombay Stock Exchange) sensitive index (Sensex) touched an all-time high of 21,207 on 10 January. Finance minister P. Chidambaram spoke optimistically about a 9% rate of GDP growth. Reserve Bank of India (RBI) governor Y.V. Reddy was reported to be considering an interest rate cut to boost investment. And stock analysts were gung-ho about the so-called decoupling theory: How the stock markets in rapidly-growing economies like India and China would be unaffected by the impending recession in the U.S.

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