Posts Tagged ‘earnings’

Positive Undertones in the Economy โ€“ Part 2 :)

Positive Undertones In The Economy

Extending to the yesterday’s post on the positive undertones of the economy in the markets and investors tips, here we coming up with the more factors which investors should use for picking up fundamentally good stocks.


1. Reality companies hike rates by 15%

Reality sector is witnessing a substantial demand, especially in the mature markets, after the prices dropped a few months ago.


With the gradual return of residential property buyers, prices in NCR and Mumbai areas have moved up 10-15%.

How long these prices will sustain is hard to determine, but this indicates the confidence of investors.


2. Better Position

India can be considered as โ€œbalancedโ€ in terms of investment and consumption with savings rate of 35% and consumption of 65% of its GDP.


The fastest growing China leans towards investment, whereas most of the western countries are weighted more towards consumption.


If we compare India’s Sensitive Index with its other Asian peers, Sensex is valued at 17.6 times estimated earnings where as China’s Shanghai Composite Index trades at 22 times earnings and the MSCI Asia Pacific Index is valued at 24 times.


So, India remains very attractive and it is an opportune time for Indian companies to grab market share.


3. Developments in the rest of the economy ๐Ÿ™‚

If we see the positive economic numbers across the globe, it seems that world economy is moving towards recovery.


Australian economy surprised with a jump in growth in the second quarter.

US have witnessed a growth in the current quarter GDP, US manufacturing and housing sectors appears to be gathering pace, quarter’s results came better than expected.


European economies like France and Germany continued their gradual emergence from the worst crisis in decades and company results showed an upturn.


4. Concerns Over Weak Monsoon!

Everyone is expecting that poor rains would push up food prices in the short-term, due to the reduced yield of kharif crop and it would add to inflationary pressures.


But at the same time, we should also know that Indian agriculture is not limited to agro commodities only, but it is well diversified into horticulture, livestock and fisheries and their share in total output of the agricultural sector is increasing.


Total agricultural output accounts for only 18.5 % of the gross domestic product and the kharif crops like cereals, pulses and oilseeds account for only 20% of it.

Moreover, government spending in rural areas will mitigate the effect of diminished monsoon rains.


So, Looking at the above factors, India growth story remains strong in the long run.


So, one can go for the companies, which will benefit from โ€œEconomic growthโ€ like power plants, roads, service providers like banking and engineering sector.

Thanks ๐Ÿ™‚

Positive Undertones in the Economy – Part 1 :)

positive undertones of economy

We had a positive Q1FY10 result, which boosted the sentiments of investors regarding the economic recovery.


But are we actually out of it?

Though the earnings were encouraging but if we analyze it, the results had a โ€œbottom-line growthโ€โ€ฆ may be because of the lower costs of raw material, huge cost cutting, profit from other sources like stake sale or stock market trading etc.


With lower interest rates, government spending in rural areas and lower base year, I am very much optimistic for Q2FY10 that these results would be โ€œrevenue drivenโ€.


Top line growth is not only good for the company and stock market but also for the economy as a whole.


Apart from the Q2FY10 numbers, there are positive undertones in the markets and investors should use these undertones for picking up fundamentally good stocks.


Those are :

1. Measures for fiscal deficit

The GoI is taking several measures to reduce the fiscal deficit.

Disinvestment is high on the priority list.


As private spending is increasing, Govt. is reducing need for stimulus.

A large part of deficit is contributed by the oil subsidy.

For this, the ministry of petroleum is lowering the subsidy burden in Kerosene and LPG.

Recently, improved tax compliance with new tax code and enforcement through the recently initiated Unique Identification Project are other steps to control the deficit.


2. Accelerating production

India’s industrial production posted the fastest pace in the last 16 months in June, which shows that India has endured the worst of the global recession.

The reason can be low interest rates, which has given confidence to the consumers to borrow to buy vehicles or other factory-made goods.


3. Capital flows to India

Another positive trigger can be the capital flows to India, which is expected to increase because of better medium-term growth and faster recovery prospects.


The Q1FY10 early indicators suggest that NRI deposits, FII portfolio inflows and inward FDI flows have generally been strong, as compared to the net capital outflows witnessed in the last two quarters of 2008-09.


4. Exports seen at $167 bn in FY10

For Indian Export Organisations, India’s exports are expected to touch around $167 billion, almost the same level of last year in FY10.

The commerce ministry looks ambitious and optimistic and has come up with foreign trade policy for the next 5 years, whereby; it aims to have an export of $ 200 billion by FY11.


This will ultimately improve the declining trend of exports and will give thrust to employment-oriented sector like Textiles and Gem Jewellery.


5. The New Tax Code

The new tax code has simplified the tax laws and will result in better compliance and a broader tax base.

The resulting incremental tax revenues will first reduce the fiscal deficit. This is a net positive.


People, there are many other factors and Positive undertones in the economy which indicates towards the betterment of the economy and stock market.

We would come up with the rest of factors in Part 2 of the topic in next blog. ๐Ÿ™‚

Stay Tuned ๐Ÿ˜‰

India’s industrial production posted the fastest pace in the last 16 months in June, which shows that India has endured the worst of

the global recession. The reason can be low interest rates, which has given confidence to the consumers to borrow to buy vehicles

or other factory-made goods.