X

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.
Check out 'economic recovery' here... - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Nov 5, 2009

    Check out 'economic recovery' here...

    Signs of economic recovery, if any, are sparsely visible only in Asian economies, particularly China and India, as the developed world is still struggling to put forth a respectable GDP growth number. The former's domestic consumption and investment led growth have lured not just local but also foreign investors to the Indian and Chinese stock markets in the past few months.

    Indian markets in particular are going through the litmus test as investors evaluate the performance of companies at the end of the most difficult 12 months of operations, in a long period of time. The investors' interests also lie in gaining some visibility into the future. While some sectors have managed to show a little colour, others failed to display a sustainable trend.



    Source: Equitymaster
    Note: Profit growth is for companies in Equitymaster's research universe

    The September quarter results of companies in Equitymaster's research universe threw up some clear winners. Sectors like auto, cement and FMCG displayed a magnificent turnaround in their bottomline performance. While these could be considered as lead indicators of an economic recovery given that each of them signify commercial, industrial and consumption growth, there are more pointers to be looked into.

    Correction in metal prices, which was the cause for the lower profit growth of steel and aluminum sectors, was also the lead cause for better profitability of the auto sector, besides the volume growth in the latter. An economic recovery in the global markets may kick start a reversal of this cause-effect equation.

    Banks failed to show momentum in profit growth despite sufficient liquidity in the system. The same while on one hand could be considered a lag effect of the economic distress in the past 12 months, are also indicative of future perils. While the sector's advances grew by 13% in the last 12 months, the gross non-performing assets went up by an alarming 23% during the same period. The accounts that turned sticky due to the failure to pay on time reflected the adverse business climate in the past, as also some cases of imprudent restructuring that are indicative of losses in future.

    Sectors like real estate that are yet to recuperate from the subprime crisis blow continue to languish under the burden of high leverage and poor sales. They have put up one of the worst performances in terms of profitability.

    While it is certainly difficult to draw out the exact contours of the 'economic recovery' from these nascent data, there are few interesting indicators to draw out a trend. Domestic consumption and investment hold the key to a sustainable growth trajectory for the Indian economy, as the West tries its best to overcome its inherent problems.

    An article on Bloomberg calls Buffett's latest investment in railroads - a play on the US' trade deficit, because the rail containers will be used to import goods from Asia. While the arguably wisest investor in the world is betting big on economic recovery of his nation, we could do well to fathom how favourably we are placed, to stay ahead in the race.

     

     

    Equitymaster requests your view! Post a comment on "Check out 'economic recovery' here...". Click here!

      
     

    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

    MARKET STATS