The outlook for the next few months is no brighter, with 414 companies forecasting either a decline in profit or falling into the red, the Wind data showed.

A report by Barclays said: "The March activity indicators, which were released along with Q1 GDP, also point to modest industrial production", which grew 8.9 percent year-on-year, slowing from 10 percent in the previous quarter.

This unexpected slowdown suggests that despite some visible restocking of raw materials in the fourth quarter of 2012, the gradual pickup in final demand is not strong enough to support a visible follow-up in inventory restocking among downstream industries, said Barclays.

The report added that industry overcapacity continues to weigh on upstream industries and restocking needs, while steel and cement output slowed in line with slowing investment growth.

Large inventories also burdened realty developers and manufacturers. The combined value of the inventories of A-share listed companies more than doubled from 1.94 trillion yuan in 2009 to 3.91 trillion yuan by the end of 2012, according to financial data service iFind.

Realty developers had combined inventories of around 1.64 trillion yuan by the end of 2012, followed by manufacturing companies at 1.15 trillion yuan, according to iFind.

"A booming stock market in China requires reforms of the mechanism for initial public offerings, and more funds to be injected into the A-share market to increase its liquidity. Otherwise, little will be improved in the A-share market," said Zhang Qi, an analyst with Haitong Securities Co Ltd.