Indian companies’ quarterly earnings and sales hit at least a 22-quarter low in the three months to June, dimming hopes of an immediate recovery with Covid-related disruptions likely to persist in the coming months.

Adjusted net profit slumped 74% from a year ago in the June quarter, while net sales declined 26.5%, according to a Mint analysis of 970 listed firms in the manufacturing and services sectors. This is the worst earnings slump since the quarter ended March 31, 2015. The Mint study excluded oil and gas, and financial services companies because they follow a separate revenue model.

While the June quarter results were not entirely unexpected, analysts warned that supply chain disruptions and the uncertain demand scenario will continue to weigh heavily on companies in the next few quarters at least.

Analysts at Kotak Securities expect an earnings recovery in companies that belong to the NSE’s Nifty50 index in the next fiscal year, rebounding from the low levels of this fiscal.

The brokerage estimates FY21 profits of Nifty50 members to decline 3.2% in the current fiscal, and then rebound 38% in the following year.

“We would clarify that FY21 estimates are not very relevant given the impact of Covid,” the analysts said.

The overall picture, however, looks slightly better if Bharti Airtel Ltd, Vodafone Idea Ltd, Tata Steel Ltd and Tata Motors Ltd, which reported heavy losses, are excluded from the analysis. Barring the four, adjusted net profit fell 41% in the June quarter from a year earlier, while net sales fell 26%.

“Supply chains are operating based on patchy demand data, which in turn is affected by localised lockdowns—this would likely keep margins subdued for the coming two quarters,” said S Hariharan, head – sales trading, Emkay Global Financial Services.

Manufacturing faced the brunt of the coronavirus-related disruptions.

Within services, hotel, aviation and tourism firms struggled the most.

A few sectors such as packaged consumer goods, healthcare and technology showed resilience.

“Healthcare and technology earnings stood out both in absolute and relative terms. Both saw meaningful earnings upgrades. Management commentaries thus far suggest firms are implementing cost rationalisation measures to protect margins and the bottom line,” said Motilal Oswal Financial Services.

Earnings support for stocks is crucial because the run-up in markets over the past few months post the March lows has been fuelled by liquidity rather than conviction about an earnings revival. The Nifty index has rallied nearly 20% in April-June while gaining over 45% since March mostly rising on foreign liquidity.

“We find the risk-reward unattractive with valuations at 21 times one-year forward Nifty earnings per share,” Motilal Oswal Financial Services said in a DATE note.