Indian companies appear to be closer to resuming a steady northward journey in revenue expansion after sales likely hit a trough in the third quarter, with taxation reforms and efficiency enhancement already boosting profits, an analysis of corporate earnings showed.“Our assessment so far is that topline growth seems to be bottoming out, with nearly half the companies showing growth acceleration compared with the September quarter. Upside surprise has been frequent in agro-chemicals, auto, and NBFC sectors,” said Sunil Tirumalai, head of research, Emkay Global Financial Services.For a common sample of 2,244 companies tracked over the past 13 quarters, revenue fell 2.4 per cent in the third FY20 quarter, coming off an unusually high base of 19 per cent growth in the year-ago quarter.Net profit, however, climbed 36.2 per cent compared with a fall of 33.8 per cent a year ago. Banks and financial institutions were not included in this set.Analysts believe the broader revenue trend may start improving from the first quarter of FY21 given rising farm incomes and lower commodity prices. To be sure, headline inflation and uneven growth in industrial output remain challenges to economic expansion.Last autumn’s reduction in corporate tax rates to 25 per cent from 35 per cent, including surcharge and education cess, undergirded corporate India’s profit growth in the quarter in which the US and China began the spadework to settle several trade and tariff-related differences, boosting the stock indices in emerging economies.“The blended tax rate (for Nifty50) was 27.4 per cent compared with 30.1 per cent in the year-ago quarter. At the aggregate level, excluding the turnaround in banking, large caps continue to outperform the mid and small caps in these challenging times,” said Pankaj Pandey, head – research, ICICI direct.Telecom services companies were also excluded from the analysis sample since their huge net loss in the September quarter would skew the profit trend of the companies under review. For instance, net profit declined sharply by 64.5 per cent in the September quarter due to ₹50,921 crore and ₹23,044 crore of losses by Vodafone Idea and Bharti Airtel, respectively.Including banking and financial firms to the sample improved the topline growth to 0.1 per cent, while net profit climbed 42.1 per cent.Sectoral trends were mixed, with infrastructure and industry reflecting greater stress than consumer-centric companies.“As far as net profit is concerned, BFSI (banking, financial services, and insurance) and consumer sectors saved the day. Auto, pharma, tech, private banks, NBFC, oil & gas, and retail were in-line. Metals numbers were expectedly weak,” said Gautam Duggad, head – Institutional Research, Motilal Oswal Financial Services (MOFSL). Cement, capital goods and telecom missed expectations, he added.Inflationary pressures and tepid growth in the index of industrial production (IIP) would shape the near-term outlook. Credit ratings agency CARE has reduced the FY20 IIP growth forecast to 2 per cent from earlier expectations of 4-4.5 per cent, simultaneously trimming the GDP growth estimates to 5 per cent from 5.2 per cent.“Liquidity tightness and the extended impact of demonetization and GST affected a few sectors. However, rising crop prices and good rabi sowing could result in rural demand revival toward the end of the March quarter or in the June quarter,” said Deepak Jasani, retail research head, HDFC Securities.Motilal Oswal’s Duggad is advising investors to look at sectors with good earnings visibility, robust balance sheet, strong long-term structural drivers and excellent management quality, given the weak underlying macros and low GDP growth.“We continue to like BFSI, consumer, IT and telecom sectors,” he said. Motilal Oswal expects FY21 bottoms-up Nifty earnings to gain about a fifth, led by BFSI, consumer, oil & gas and automotive industries.