Gathering strength

An analysis of 2,800 non-financial companies show that while net sales year on year have decreased by 9%, net profit increased by about 11%. This indicates that a secular demand growth is still a few quarters away and the current growth is a result of the government’s stimulus packages. But for financial companies, the trend is just the opposite: net sales on a year on year basis increased by about 20% and net profit rose by 56%. The benefit of low-commodity prices, cost-cutting measures and operational efficiency, which companies had undertaken in the last two quarters, continued to play out during the quarter ended September, too.

Sarabjit Kour Nangra, vice-president, research, Angel Broking expects secular demand growth to emerge during the second half of FY 2010. “While the initial leg of the growth was a result of the stimulus packages, the overall growth is likely to intensify, encompassing more segments of the economy as suggested by improvement in the various economic indicators.”

Taking a broader perspective, Mohan K Swamy, head of equity research at RBS, says that the government stimulus in terms of excise reduction and rural initiatives like NAREGA has fast tracked the recovery. “The inherent under penetration

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