Why has CRISIL downgraded the quarterly margins for Dec-21 quarter?

According to CRISIL estimates, the operating profit margins of Indian companies would drop by 100-120 bps due to a sharp surge in commodity prices. While price hikes will help the top line, operating cost spikes can only be passed on partially. Commodity costs of steel, oil and other inputs have been a big challenge. That is likely to worsen in Q3.

The drop in the operating margins was also likely to be about 70 bps on a sequential basis. Interestingly, the margin fall was likely to be led by IT companies with fall of over 200 bps while consumer discretionary and pharma would see margin contraction of 100 bps and more. It would not be feasible to pass on the entire input cost spike.