Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
BSE 30: Where do you go? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 25, 2003

    BSE 30: Where do you go?

    The equity markets have not lived up to the expectations of individual investors. The markets for the last decade have been marred by scandals and unavoidable events, which have caused the souring of sentiment.

    Here we study the BSE-30 index stocks, how the group has performed in the last eight years. The Sensex has stocks, which are mainly from the manufacturing sector. However, the group does include banking and finance stalwarts like State Bank of India (SBI) and Housing Development Finance Corporation Ltd. (HDFC). From the services sector we have Infosys and Zee Telefilms.

      FY96 FY02 CAGR
    Sales (Rs Mn) 688,164 2,166,939 17.8%
    Operating Profit / EBDIT (Rs Mn) 150,947 447,559 16.8%
    Net Profit / PAT (Rs Mn) 60,361 168,280 15.8%
    Market Cap* 1,449,162 2,547,714 6.5%

    *As on 06/03/96 and 03/03/2003 respectively

    The Indian economy has been bogged down by lack of agricultural output, industrial slowdown, increase in inflation and geo-political issues. All these factors have indeed soured investor sentiment. However, these factors have not deterred the BSE 30 companies from growing. In FY95, the average sales figure for the group was around Rs 688 bn, now this figure has jumped to Rs 2,167 bn (FY02), a 17% CAGR. What’s more, at net profit levels the group has grown from Rs 60 bn (FY95) to Rs 168 bn in FY02, a 16% CAGR.

    Infosys has had the distinction of posting a CAGR of 74% for its topline, the nearest at 60% is Zee Telefilms. The manufacturing pivotals have been growing in the range of 10-20%. However, all other companies have been posting at a healthy growth between 25-40%, which indicates that the companies are becoming more efficient than what they were a few years back. Also read ‘India Inc: Sweating it out’.

    But this performance is not reflected in the total market capitalization of the BSE – 30. While bottomline of the Sensex has gone up 16% CAGR in the last decade, the market cap of the same group is up only 6%. So, it seems that the Sensex has not kept pace with the earnings growth. In effect, the P/E of this BSE 30 group, which stood at 24x FY95 earnings, has now come down to 12x earnings currently.

    This means that investors were expected India Inc. to grow rapidly post liberalization and clock a higher GDP growth (above the traditional hindu growth rate). But post FY97, GDP growth has been sluggish and we are yet to see even a 7% GDP growth in the last 5 years.

    Going forward, FY04 also does not seem to enthuse investor confidence, as there are concerns of a lag effect of poor agricultural output on FY04. The length of the current US-Iraq war can also affect the performance of some these companies. However, with the Sensex currently trading at P/E of 12x, the valuations do look attractive from the long-term perspective.



    Equitymaster requests your view! Post a comment on " BSE 30: Where do you go?". Click here!


    More Views on News

    Insider Leaks Equitymaster Stock Picks (The 5 Minute Wrapup)

    Jul 25, 2017

    Equitymaster HQ has been infiltrated. Valuable stock ideas have been leaked. Who's responsible?

    Raymond and Other 'For Profit' Companies Who Don't Care about Shareholder Returns (The 5 Minute Wrapup)

    May 27, 2017

    What happens when minority shareholders are short-changed in the normal course of business?

    Why Commission Driven Model In Mutual Funds Should Be Eliminated... (Outside View)

    Feb 15, 2017

    PersonalFN believes SEBI has taken a step back-apparently in the admission of it going overboard with the regulations.

    This Book Changed How I Looked at the World of Man and Money (Vivek Kaul's Diary)

    Aug 24, 2016

    And here's your chance to claim a free copy of this book...

    The Developed World is Dying because of Demographics, Debt, and Deflation (Vivek Kaul's Diary)

    Aug 12, 2016

    And Why India's demographic dividend could turn out to be a doubtful debt...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms