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
Be the first to comment.