Wednesday, January 6, 2010

WHERE TO GO IN 3rd QUARTERLY RESULTS


The 3rd quarter results are all set to get out from the second week of January. Lot of predications and calculations as well as bets are being held on different sectors prospects. In this article I will like to dig out the invisible facts, trends and insight which we will provide us some light inside the deep fog of 3rd quarter results.
AUTOMOBILE SECTOR.
These sectors have been on a roller coaster ride from the period when Indian economy bounced back from the cold breeze of recession from the west. If we look at some of the figures we find that

• Notwithstanding the recent economic slump, the Indian automobile industry registered robust sales growth in 2009.

• In the sales corner of this sector we find domestic sales grew at about 16%, while exports stood at 15% growth in 2009.

• According to the Society of Indian Automobile Manufacturers automobile production in India grew at 14% and sales picked up during the second half of 2009 over the first half of the year.

• Production increased from about 60,000 units in 2008 to approximately about 80,000 units in 2009.

• India's auto sales surged 71.9% in November from a year earlier to 207,500 vehicle.

• The festive season have added fuel to the growth of sales figure.

Hence in this 3rd quarter we will get healthy growth figures in the profitability of the auto companies.

• Whatever price increase of steel and other commodities related to auto sector will show its affect in the coming quarters and not in this 3rd quarter of 2009-10 fy.

• But as the market valuation is high it’s advised not to go for long call in investments in this sector.

• Once the results are out one needs to analyze the trend of future profitability depending on the birth of future demand despite of any hike in interest rates and other government policies.

According to me it would be wise to invest in those companies where sales is having a higher proportion coming from commercial vehicle. Those who want to take advantage and make quick money from the instant hiccups that come from this sector might go for investments but at the sole risk of themselves.

BANKING SECTOR.
The Indian banking sector is planning to go for mergers and consolidation so as to strengthen the Indian banking in front of the global standards. The main reasons behind this are that smaller banks are having their NPA increasing day by day.

• On an average 26% rise in net NPAs have been registered by 21 public sector and commercial banks during the second quarter of the current financial year as against the same period last year as per Industry body Assocham.

• As per its analysis, the aggregate NPA of 21 banks - 19 public sector banks and two large private banks - increased by 26% to Rs 25,137 crore in the second quarter of 2009-10 from Rs 19,920 crore against the year ago period.

The sector is now surrounded with a buzz called rising inflation which will force the RBI to squeeze liquidity out of the economy.

• Its true that any central bank of any economy will carry on the policies declared during recession times. It will have to go back to normal phase of operation in order to keep the economy away from bailout.

• The banks will post a good numbers and will also be able to show growth in the 3rd quarter results.

• Good growth of loans during the festive season will provide the first fruits of good profit growth in 3rd quarter. Although in December we find 11% growth in loan off take which is the lowest ever .

• We will get loan growth in the banking space from automobile, farm ,real estate and infrastructure projects started after monsoon.

• Late monsoon have propelled the growth in farm sector.

• So a growth farm loans will increase the growth of loans and profit of the banking space. Demand of farm also increases the demand of fertilizers and other FMCG sector.

But if one plans to go for investments in this sector it will prune to stay away.

• As the RBI might go for a rate hike .In that cases this sector historically have reacted in a negative manner.

• Moreover from the financial year of 2010-11 the banking sector will come under the purview of Basel II norms.

• Where some factor regarding internal control and banking regulations regarding loans and other structures will come under some stringent regulations.

Once the results are out and keeping a close eye on the RBI monetary policies one should go for a long call. Those who want to take advantage and make quick money from the instant hiccups that come from this sector might go for investments but at the sole risk of themselves.
CAPITAL GOODS.
These sectors have been one of the prime contributor to the Indian economic growth.

In the IIP numbers which reflects the manufacturing and industrial growth of Indian economy where we get that:
• Industrial output increased by 10.3% in October.


• 9.63% recorded a growth in September as compared from October 2008, when the index of industrial production (IIP) grew a mere 0.1%.

• Lowe commodity prices will be the prime contributors behind healthy profit numbers from this sector.

• The increased demand of industrial goods and infrastructure projects will increase he top line as well as the bottom line growth of the sector.
The increased demand of industrial goods and infrastructure projects will increase he top line as well as the bottom line growth of the sector.

When we look in to the historical figure of the growth in core industries of India we find that :

• In April and May 2009, when core sector grew at 3.7% and 3.2% respectively, IIP rose 1.1% and 2.1%.

• In June and July when core sector grew at 6.3% and 3.3%, IIP improved by 8.3% and 7.2% respectively.

• In August, when core sector showed a growth of 6.5%, the industrial growth touched 11%.

Capital good sector is one of the sectors where it’s advised to stay invested and buy at every fall. One go for long as well as short call for investments. This sector is now ready to show again a growth in profitability. Some hiccups in the future might come form higher commodity prices and increase in interest rates costs. But the higher and never ending demand from this sector will make over all the hiccups and will swim out from any pressures of future.

In my next article will discuss the remaining sectors.

1 comments:

H@RdiK

Nice Analysis still short term trend also affect the market like sugar stock, spectrum for telecom sector etc.

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