February 15, 2010 by akhilendra
Investor’s watchman-Things to look for
This year has seen a lot of upsurge in stock market. If last year was a year of great fall, sorrow and depression, this year has seen the confidence coming back to streets. Things might be looking in a good shape, but we need to ask one question, ‘Are they really in good shape?’ because something, as devastating as recession, cannot be healed in few months. It’s a process which should take more time than it has, so we need to be more vigilant while looking for truth. The global economical situation has stabilized but still remains delicate. USA registered a positive GDP for quarter end September but analyst are not sure whether it’s temporary change or sign of recovery. In India, things have been quite different from west, recession has not been here at such a large scale but country has witnessed a slowdown in its economical growth. There has been a complete turnaround in last six months or so.
In short term, challenges remain to tackle last year’s economical downturn and inflation. As per expectations, inflation will reach around 7 percent in next six to eight months. Central bank may start taking steps towards tightening monetary policies. Government may also think to reduce its fiscal deficit. Companies have done well so far in managing profits and margins. Though, they are stuck at the topline and if sales didn’t improve, it will be quite difficult for them to sustain profitability. Sales have remained flat and aggregate sales have declined. The companies have derived a lot from their robust bottom line growth. Cash positions have improved but earning still doesn’t reflect that. There have been few sectors which have seen a year like never before. Auto sector, being one of them. They have recorded huge growth in sales and profit.
FMCG and pharma sector have been quite resilient and IT sector has managed to survive with some improvement. Market has moved up in a very unconventional way and had almost doubled from level of 8000 to 16000 in one year. Analysts are quite skeptical about further up move. Analyst believes that now onward key remains with foreign institutional investors. Volatility will remain in the market and market will largely depend and in and out flow of the FII’s. As per experts, valuations are very high at the current level and are cause of worry in the short tem. Margins are still tough to be maintained but in the long term things are quite promising.
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