These companies constitute 49 per cent of the market capitalisation on the Bombay Stock Exchange as well as 57 per cent of net sales of the corporate sector in 1997-98.The overall performance has been brought down by two industries: iron and steel and commercial vehicles and to a lesser extent by that of the cement & cement products and paper and paper product industries.

These four industries have been hit by slack demand conditions. Excluding these two, the growth in net profits has been 21.5 % Net profit margin of the aggregate sample improved marginally from 5.8 % during 1997-98 Q1 to 6 % during 1998-99 Q1 which is mostly contributed by a fall in the expenses-to-sales ratio from 79 % to 78.5 %.

The net profit margin has improved for the majority of companies by 51 per cent. This has beendue to cost-reduction (about 49 per cent of sample showed a reduction in costs). Further cost reduction was seen in 19 out of the 22 industries which witnessed high growth in net profits while 13 out of 19 industries which had low growth in net profits witnessed an increase in cost ratio.

A size wise analysis indicates that the medium-sized companies have registered a remarkable growth in profits of 38.1 per cent. The analysis shows that competition and demand conditions have affected a number of industries. However service sector covering software, construction, telecom, and drilling did extremely well as did computers, petrochemicals, non-electricals machinery, cotton woven fabrics, nitrogenous fertilisers, electrical machinery, petroleum and petroleum products, and diversified companies.

The small companies performed poorly registering a fall in growth in net profits (-19.5 per cent) due to lower growth in sales and high growth in expenses. Large companies' net growth (12.6 % ) have been lower thanthe average. Adjusting for extreme cases of profit change (both positive and negative ) in all size groups, the overall performance improved in all cases except medium companies. It is noticed that the profit performances is independent of size and more dependent on the nature of industry. In the study the companies with sales of over Rs 125 crore have been classified as large companies, companies having sales between Rs 25 crore and Rs 125 crore are put under medium and companies having less than Rs 25 crore are put under small companies.