Stock markets generally reflect the mood of India Incoporated's quarterly results. A euphoria was built by market participants in anticipation of some extra ordinary first quarter results. With a major chun kof results already announced for the first quarterr of Fiscal 2010-11, there is a fit case for valuations to adjust downwards.
An analysis of the 300 leading companies reveals that although sales have grown strongly at an average of 20%, profits have shown a subdued growth figure of 12% (excluding the loss making oil PSU's). The reasons cited for the sluggish profit growth are pressure on margins due to higher than expected commodity prices, which have pushed up raw material costs. Interest rates are likely to resume their upward march, after declining fo the past one year, in the wake of a series of rate hikes by RBI. This phenamenon is likely to continue for next two quarters putting more pressure on the margins.
The results have been a mixed bag. With a few companies showing excellent growth in profits, it is perhaps a time to churn your portfolio, after analysing the first qurter results, and also giving due weightage to the full year guidance given by these companies. IT and Banking sector stocks have, by and large, returned excellent figures, leading to a run up in thier stock prices. It may be prudent to wait for a while to enable these stocks to cool off, before taking a decision to invest.
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