, the report said. India's real GDP has grown by 12 per cent on an absolute basis from December 2019 to June 2023, at a 3.3 per cent CAGR. The growth in nominal GDP and GST collections have been exceedingly healthy. This is in line with topline growth trends across the economy. All the headline numbers like tax collection, corporate sales, non-oil imports, transaction values and nominal wage increases have grown sharply after the Covid bust. Take the case of corporate sales growth which has grown at a CAGR of 12 per cent since the December 2019 quarter. Corporate India during this period did massive costs savings and enjoyed low raw material costs, thereby witnessing tremendous profitability and EPS growth. Corporate profits are driven by topline (sales) growth, margin expansions and investment efficiencies. All three are getting undone gradually. 'We have seen how inflation has been gradually declining globally and now the delayed impact of elevated interest rates is beginning to show up in consumer demand and growth," it said. This is likely to take the shape of a decline in sales growth for corporates, not just in India, but globally. A decline in sales growth can exert negative pressure on a company's profitability by reducing its topline revenue, squeezing profit margins, and challenging its ability to capitalise on economies of scale. 'The edifice of a global equity rally post pandemic has been built on a strong earnings growth and a large valuation (PE ratio) multiple expansion. A slower sales growth & high interest rate combination can lead to a de-rating across equity markets', the report said. When small-caps delivered returns far above base rates (more than 35 per cent) over three years, the next seven-year forward returns were abysmal (less than 5 per cent CAGR). For mid-caps, it appears mixed with a period of sustained outperformance and muted returns. Small and mid-caps need to undergo price or time correction, or both to once again become attractive for investors, the report said. /IANS