The headline BCPI fell 2.8 points to 57.3 for the December quarter (Q3) of FY27, reversing part of the recovery seen in July (Q2). This was driven primarily by a sharp deterioration in sentiment on macroeconomic conditions, the survey of more than 150 chief executive officers (CEOs) and chief financial officers (CFOs) showed.
Yet expectations of profitability and capacity utilisation strengthened, with nearly 60 per cent of firms planning capital investment. Both the business sentiment index (62.1) and capital expenditure index (57.4) rose sequentially for the third quarter.
Historically, macroeconomic and business sentiment have moved in the same direction. The gap between the two indices, which normally stays within the 2-5-point range, increased to around 16 points in Q3FY27.
“Companies are more confident about their own prospects than about the wider economy. Expectations of sales and profits are improving, but geopolitical uncertainties cloud the outlook, particularly through potential supply-chain disruption and oil-price volatility. Businesses are backing opportunities they can see while remaining wary of risks they cannot control,” said Suraj Saigal, research director, IMA India.
The survey found that 57.6 per cent of companies had either committed to new investment or intended to do so, close to the highest level recorded in the recent series. For capital expenditure expectations, the net score, which measures the difference between those saying “up” and those saying “down”, stood at 15.2.
Investment sentiment was particularly strong in the automobile sector, where the net score rose to 50 from 12.5 in the previous quarter.
Industrials, too, reported an improvement in business performance expectations, with the sector recording a net score of 64.3 for sales and 50 for new orders.
Larger companies were considerably more optimistic about investment than their smaller counterparts.
Firms with annual revenues exceeding ₹2,500 crore recorded a net capital expenditure score of 66.7, following a sharp increase from the previous quarter. In contrast, companies with revenues below ₹500 crore reported a score of minus 8.8.
Hiring intentions among companies surveyed improved, with the net score rising to 9.9 in Q3FY27 from 1.3 in the previous quarter, driven by an improved outlook in both manufacturing and services.
Construction companies reported the strongest hiring outlook, while consumer goods firms were the most pessimistic, with a net score of minus 20.
Expectations for sales and new orders remained positive despite the weakening economic outlook. The overall net score for sales stood at 41.6 in the third quarter, while that for new orders was 36.4 for the same quarter.
Industrials led expectations for both indicators, while the banking, financial services and insurance (BFSI) sector continued to report relatively strong sales prospects despite a substantial correction from the previous quarter.
The chemicals sector remained the weakest performer on sales and new orders. Consumer goods companies also continued to report subdued expectations for sales, profitability and capacity utilisation, highlighting the uneven nature of the recovery across sectors.
Profitability expectations of CEOs and CFOs improved, with the overall net score rising to 18.8 from 5.4 in the previous quarter. The share of companies expecting capacity utilisation to increase also exceeded those anticipating a decline, taking the net score for the indicator to 29.4.
Services firms outperformed manufacturers on both measures. The net score on profitability among services companies rose to 28.3 from 1.5 in the previous quarter, while their capacity utilisation score increased to 35.7 from 25.8.
The automobile sector led expectations of capacity utilisation with a net score of 42.9. By contrast, chemicals and consumer goods companies recorded profitability scores of zero.
The chemicals sector reported the weakest capacity utilisation outlook.
