Coronavirus Outbreak Will Impact India Inc.’s Q1 Results: Centrum Broking’s Nischal Maheshwari

India’s equity market has underestimated the impact of the coronavirus outbreak and will have to absorb a hit in earnings in the coming quarter, according to Centrum Broking’s Nischal Maheshwari.

All companies with a link to the global supply chain will be affected, the chief executive officer of institutional equities at the research firm told BloombergQuint. While inventories will help firms in the current quarter, the impact of coronavirus—that has killed more than 1,000 people in China—is likely to extend beyond March, he said.

“We have already started seeing prices increase and in this environment where you do not have pricing power, to pass on costs would be very difficult for anybody,” Maheshwari said. “So, profitability and sales both would be impacted next quarter.”

Several domestic companies, along with their global peers, have expressed concerns about disruption in production and supplies on account of the coronavirus outbreak. Automakers such as Mahindra & Mahindra Ltd. said the outbreak would hit production of some vehicles, affecting its transition to newer emission standards, as they import some components from China. Apple Inc. said it would miss revenue guidance for the current quarter due to supply constraints and diminished demand.

About the equity market, Maheshwari said the polarisation in the Nifty 50 was likely to continue. “All the calls of recovery in small and mid caps, I don’t think that’s happening in a hurry,” he said. “Domestically, till we don’t have this liquidity issue sorted out, I don’t think mid and small caps will do well.”